Attached files
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EX-32.1 - EX-32.1 - TIDELANDS ROYALTY TRUST B | d75108exv32w1.htm |
EX-31.1 - EX-31.1 - TIDELANDS ROYALTY TRUST B | d75108exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number 000-08677
Tidelands Royalty Trust B
(Exact name of registrant as specified in its charter)
Texas (State or other jurisdiction of incorporation or organization) |
75-6007863 (I.R.S. Employer Identification No.) |
|
U.S. Trust, Bank of America Private Wealth Management P.O. Box 830650, Dallas, Texas (Address of principal executive offices) |
75283-0650 (Zip Code) |
Registrants telephone number, including area code (800) 985-0794
None
(Former name, former address and former fiscal year
if changed since last report)
(Former name, former address and former fiscal year
if changed since last report)
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 þ No o
Indicate by check mark 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 whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
Indicate number of units of beneficial interest outstanding as of the latest practicable date:
As of August 4, 2010, Tidelands Royalty Trust B had 1,386,375 units of beneficial interest
outstanding.
TIDELANDS ROYALTY TRUST B
INDEX
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
As of June 30, 2010 and December 31, 2009
As of June 30, 2010 and December 31, 2009
December 31, | ||||||||
June 30, 2010 | 2009 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,397,895 | $ | 1,531,808 | ||||
Oil, gas and other mineral properties |
2 | 2 | ||||||
Federal income tax refundable |
12,734 | 15,934 | ||||||
Total assets |
$ | 1,410,631 | $ | 1,547,744 | ||||
LIABILITIES AND TRUST CORPUS |
||||||||
Current liabilities: |
||||||||
Income distributable to unitholders |
$ | 610,206 | $ | 609,840 | ||||
Total current liabilities |
$ | 610,206 | $ | 609,840 | ||||
Trust corpus authorized 1,386,525 units of
beneficial interest, issued
1,386,375 at nominal value |
$ | 800,425 | $ | 937,904 | ||||
$ | 1,410,631 | $ | 1,547,744 | |||||
See accompanying notes to condensed consolidated financial statements.
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Table of Contents
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME
For the Three and Six Months Ended June 30, 2010 and 2009
(Unaudited)
For the Three and Six Months Ended June 30, 2010 and 2009
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income: |
||||||||||||||||
Oil and gas royalties |
$ | 525,991 | $ | 634,411 | $ | 1,208,588 | $ | 1,806,487 | ||||||||
Interest income |
| 76 | | 757 | ||||||||||||
Total income |
$ | 525,991 | $ | 634,487 | $ | 1,208,588 | $ | 1,807,244 | ||||||||
Expenses: |
||||||||||||||||
General and
administrative |
$ | 68,471 | $ | 85,235 | $ | 112,573 | $ | 161,204 | ||||||||
Distributable income
before Federal income
taxes |
457,520 | 549,252 | 1,096,015 | 1,646,040 | ||||||||||||
Federal income taxes
of subsidiary |
1,200 | 800 | 3,200 | 9,200 | ||||||||||||
Distributable income |
$ | 456,320 | $ | 548,452 | $ | 1,092,815 | $ | 1,636,840 | ||||||||
Distributable income
per unit |
$ | 0.33 | $ | 0.39 | $ | 0.79 | $ | 1.18 | ||||||||
Distributions per unit |
$ | 0.44 | $ | 0.55 | $ | 0.89 | $ | 1.41 | ||||||||
Units outstanding |
1,386,375 | 1,386,375 | 1,386,375 | 1,386,375 |
See accompanying notes to condensed consolidated financial statements.
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Table of Contents
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS
For the Six Months Ended June 30, 2010 and 2009
(Unaudited)
For the Six Months Ended June 30, 2010 and 2009
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
Trust corpus, beginning of period |
$ | 937,904 | $ | 1,233,375 | ||||
Distributable income |
1,092,815 | 1,636,840 | ||||||
Distributions to unitholders |
1,230,294 | 1,949,381 | ||||||
Trust corpus, end of period |
$ | 800,425 | $ | 920,834 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Table of Contents
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
(Unaudited)
June 30, 2010
(Unaudited)
Note 1. Accounting Policies
The financial statements include the financial statements of Tidelands Royalty Trust B (the
Trust) and Tidelands Royalty B Corporation, its wholly-owned subsidiary (Tidelands
Corporation, and collectively with the Trust, Tidelands). The financial statements are
condensed and consolidated and should be read in conjunction with Tidelands Annual Report on Form
10-K for the fiscal year ended December 31, 2009. The financial statements included herein are
unaudited, but in the opinion of the trustee of the Trust, they include all adjustments necessary
for a fair presentation of the results of operations for the periods indicated. Operating results
for the interim periods reported herein are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2010.
Note 2. Basis of Accounting
The financial statements of Tidelands are prepared on the modified cash basis method and are
not intended to present financial position and results of operations in conformity with accounting
principles generally accepted in the United States of America (GAAP). Under the modified cash
basis method:
| Royalty income is recognized in the month when received by Tidelands. | ||
| Tidelands expenses (which include accounting, legal, and other professional fees, trustees fees and out-of-pocket expenses) are recorded on an accrual basis. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary. | ||
| Distributions to unitholders are recognized when declared by the trustee of the Trust. |
The financial statements of Tidelands differ from financial statements prepared in conformity
with GAAP because of the following:
| Royalty income is recognized in the month received rather than in the month of production. | ||
| Reserves may be established for contingencies that would not be recorded under GAAP. |
This comprehensive basis of accounting corresponds to the accounting principles permitted for
royalty trusts by the U.S. Securities and Exchange Commission (the SEC), as specified by Staff
Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.
Note 3. Distributable Income
The Trusts Indenture, as amended (the Indenture), provides that the trustee is to
distribute all cash in the Trust, less an amount reserved for payment of accrued liabilities and
estimated future expenses, to unitholders of record on the last business day of March, June,
September and December of each year. Such payments are to be made within 15 days after the record
date.
As stated under Accounting Policies above, the financial statements in this Quarterly Report
on Form 10-Q are the condensed and consolidated account balances of the Trust and Tidelands
Corporation. However, distributable income is paid from the account balances of the Trust.
Distributable income is comprised of (i) royalties from offshore Texas leases owned directly by the
Trust, (ii) 95% of the overriding royalties received by Tidelands Corporation from offshore
Louisiana leases, which are retained by and delivered to the Trust on a quarterly basis, (iii)
dividends paid to the Trust by Tidelands Corporation, less (iv) administrative expenses incurred by
the Trust. Distributions fluctuate from quarter to quarter due to changes in oil and natural gas
prices and production quantities.
4
Table of Contents
Note 4. Subsequent Event
The Trust declared a quarterly cash distribution to the holders of its units of beneficial
interest of $610,582 ($0.440416 per unit), which it paid on July 14, 2010 to unitholders of record
on June 30, 2010.
Subsequent events have been evaluated through the date of the Quarterly Report on Form 10-Q in
which these financial statements are included.
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Table of Contents
Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations
Organization
The Trust is a royalty trust that was created on June 1, 1954 under the laws of the State of
Texas. U.S. Trust, Bank of America Private Wealth Management serves as corporate trustee (the
Trustee). The Indenture provides that the term of the Trust will expire on April 30, 2021,
unless extended by the vote of the holders of a majority of the outstanding units of beneficial
interest. The Trust is not permitted to engage in any business activity because it was organized
for the sole purpose of providing an efficient, orderly and practical means for the administration
and liquidation of rights to interests in certain oil, natural gas or other mineral leases obtained
by Gulf Oil Corporation (Gulf) in a designated area of the Gulf of Mexico. These rights are
evidenced by a contract between the Trusts predecessors and Gulf dated April 30, 1951 (the 1951
Contract), which is binding upon the assignees of Gulf. As a result of various transactions that
have occurred since 1951, the Gulf interests that were subject to the 1951 Contract now are held by
Chevron U.S.A., Inc. (Chevron), which is a subsidiary of Chevron Corporation, and its assignees.
The Trust holds title to interests in properties subject to the 1951 Contract that are situated
offshore of Texas.
The Trusts wholly-owned subsidiary, Tidelands Corporation, holds title to interests in
properties subject to the 1951 Contract that are situated offshore of Louisiana because at the time
the Trust was created, trusts could not hold these interests under Louisiana law. Tidelands
Corporation is prohibited from engaging in a trade or business and does only those things necessary
for the administration and liquidation of its properties.
Tidelands rights are generally referred to as overriding royalty interests in the oil and
natural gas industry. An overriding royalty interest is created by an assignment by the owner of a
working interest in an oil or gas lease. The royalty rights associated with an overriding royalty
interest terminate when the underlying lease terminates. All production and marketing functions
are conducted by the working interest owners of the leases. Income from the overriding royalties
is paid to Tidelands either (i) on the basis of the selling price of oil, natural gas and other
minerals produced, saved or sold, or (ii) at the value at the wellhead as determined by industry
standards, when the selling price does not reflect the value at the wellhead.
The Trustee assumes that some units of beneficial interest are held by middlemen, as such term
is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint
owners, and brokers holding an interest for a customer in street name). Therefore, the Trustee
considers the Trust to be a widely held fixed investment trust (WHFIT) for U.S. Federal income
tax purposes. Accordingly, the Trust will provide tax information in accordance with applicable
U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT.
The representative of the Trust that will provide the required information is U.S. Trust, Bank of
America Private Wealth Management, and the contact information for the representative is as
follows:
U.S. Trust, Bank of America Private Wealth Management
P.O. Box 830650
Dallas, Texas 75283-0650
Telephone number: (800) 985-0794
P.O. Box 830650
Dallas, Texas 75283-0650
Telephone number: (800) 985-0794
Each unitholder should consult his or her own tax advisor for compliance matters.
Liquidity and Capital Resources
Due to the limited purpose of the Trust as stated in the Trusts Indenture, there is no
requirement for capital. The Trusts only obligation is to distribute to unitholders the
distributable income actually collected. As an administrator of oil and natural gas royalty
properties, the Trust collects royalties monthly, pays administration expenses and disburses all
net royalties collected to its unitholders each quarter.
The Trusts Indenture (and Tidelands Corporations charter and by-laws) expressly prohibits
the operation of any kind of trade or business. The Trusts oil and natural gas properties are
depleting assets and are not being replaced due to the prohibition against these investments.
These restrictions, along with other factors, allow the Trust to be treated as a grantor trust. As
a grantor trust, all income and deductions for state and U.S. Federal tax purposes generally flow
through to each individual unitholder. In May 2006, the State of Texas passed legislation to
implement a franchise or
margin tax. The Trust does not believe that it is subject to the franchise tax because at
least 90% of its income is from
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passive sources. Please see Tidelands Annual Report on Form 10-K
for the year ended December 31, 2009 for further information. Tidelands Corporation is a taxable
entity and pays U.S. Federal taxes on its income. However, Tidelands Corporations income
specifically excludes 95% of oil and natural gas royalties collected by Tidelands Corporation,
which are retained by and delivered to the Trust in respect of the Trusts net profits interest.
The Leases
As of August 2, 2010, Tidelands had an overriding royalty interest in five oil and natural gas
leases covering 22,948 gross acres in the Gulf of Mexico in the Galveston, Sabine Pass and West
Cameron areas. Tidelands overriding royalty interest on four of the five leases is 4.1662%. On
the fifth lease, the overriding royalty interest is 1.0416%. The overriding royalty interest on
the fifth lease is lower because Chevron only acquired a 25% working interest in the lease. These
leases and related overriding royalty interests are identified in the table below:
Area | Block | Lease Number |
Acres | Royalty Interest |
Operator(s) | |||||||||||||||
Galveston |
303 | 4565 | 5,760 | 4.1662 | % | W&T Offshore Inc. | ||||||||||||||
Sabine Pass |
13 | 3959 | 3,438 | 4.1662 | % | NOEX Energy, Inc. | ||||||||||||||
West Cameron |
165 | 758 | 5,000 | 4.1662 | % | Apache Corporation | ||||||||||||||
West Cameron |
291 | 4397 | 5,000 | 4.1662 | % | Apache Corporation | ||||||||||||||
West Cameron |
225 | 900 | 3,750 | 1.0416 | % | ENI US Operating Co., Inc. and Breton Engineering LLC |
||||||||||||||
Total |
22,948 | |||||||||||||||||||
Based on the latest public records reviewed by Tidelands, there are 17 wells that have had
recent production on these five leases subject to Tidelands overriding royalty interest that are
listed as active oil or natural gas wells on the records of the Bureau of Ocean Energy, Management,
Regulation and Enforcement, a division of the U.S. government. The wells vary in age from less
than one year to 32 years. Information on each of the 17 wells is presented in the following
table:
Location | Well | Type | First Produced | |||||
West Cameron Block 165
|
A003 | Gas | April 1978 | |||||
West Cameron Block 165
|
A001A | Gas | September 2002 | |||||
West Cameron Block 165
|
A006 | Gas | August 2004 | |||||
West Cameron Block 165
|
A008 | Gas | December 2007 | |||||
West Cameron Block 165
|
A007 | Gas | July 2008 | |||||
West Cameron Block 225
|
C001D | Gas | May 2003 | |||||
West Cameron Block 225
|
008 | Gas | June 2008 | |||||
Sabine Pass Block 13
|
A001 | Oil | January 1986 | |||||
Sabine Pass Block 13
|
B001A | Oil | May 1997 | |||||
Sabine Pass Block 13
|
A004 | Oil | November 2008 | |||||
Sabine Pass Block 13
|
A005 | Gas | December 2008 | |||||
Sabine Pass Block 13
|
A006 | Gas | February 2009 | |||||
West Cameron Block 291
|
002 | Gas | June 1987 | |||||
West Cameron Block 291
|
003 | Gas | July 2008 | |||||
Galveston Area Block 303
|
A002 | Gas | April 2001 | |||||
Galveston Area Block 303
|
B001 | Gas | March 2007 | |||||
Galveston Area Block 303
|
007 | Gas | August 2008 |
There was a decrease of two active wells from June 30, 2009 to June 30, 2010.
During the second quarter of 2010, Apache Corporation completed the purchase of certain of
Devon Energy Corporations Gulf of Mexico leases, including the leases in the West Cameron Block
165 Field. Tidelands royalty interest position did not change as a result of this sale.
On April 20, 2010, a deepwater drilling rig exploded and sank in the Gulf of Mexico, which
resulted in loss of life and a substantial oil spill. To date, Tidelands has not been directly
impacted by this explosion, as Tidelands does not
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receive royalties from the well and Tidelands
interests are located in a different part of the Gulf of Mexico and in shallow water. However, how
Tidelands may be affected by this incident in the future, including any new or additional
regulations that may be adopted in response to the incident that could affect wells from which
Tidelands receives royalties, is unknown at this time.
Critical Accounting Policies and Estimates
In accordance with the U.S. Securities and Exchange Commission (the SEC) Staff Accounting
Bulletin Topic 12:E, Financial Statements of Royalty Trusts, Tidelands uses the modified cash basis
method of accounting. Under this accounting method, royalty income is recorded when received, and
distributions to unitholders are recorded when declared by the Trustee of the Trust. Expenses of
Tidelands (which include accounting, legal, and other professional fees, trustees fees and
out-of-pocket expenses) are recorded on an accrual basis. Tidelands also reports distributable
income instead of net income under the modified cash basis method of accounting. Cash reserves are
permitted to be established by the Trustee for certain contingencies that would not be recorded
under accounting principles generally accepted in the United States of America (GAAP).
Tidelands did not have any changes in critical accounting policies or in significant
accounting estimates during the three months ended June 30, 2010. Please see Tidelands Annual
Report on Form 10-K for the year ended December 31, 2009 for a detailed discussion of its critical
accounting policies.
General
Tidelands royalty income is derived from the oil and natural gas production activities of
unrelated parties. Tidelands royalty income fluctuates from period to period based upon factors
beyond Tidelands control, including, without limitation, the number of productive wells drilled
and maintained on leases subject to Tidelands interest, the level of production over time from
such wells and the prices at which the oil and natural gas from such wells are sold.
Important aspects of Tidelands operations are conducted by third parties. Tidelands royalty
income is dependent on the operations of the working interest owners of the leases on which
Tidelands has an overriding royalty interest. The oil and natural gas companies that lease tracts
subject to Tidelands interests are responsible for the production and sale of oil and natural gas
and the calculation of royalty payments to Tidelands. The only obligation of the working interest
owners to Tidelands is to make monthly overriding royalty payments of Tidelands interest in the
oil and natural gas sold. Tidelands distributions are processed and paid by American Stock
Transfer & Trust Company, LLC as the agent for Tidelands. The volume of oil and gas produced and
its selling price are the primary factors in the calculation of overriding royalty payments.
Production is affected by the declining capability of the producing wells, the number of new wells
drilled, and the number of existing wells re-worked and placed back in production. Production from
existing wells is anticipated to decrease in the future due to normal well depletion. Tidelands
has no input with the operators regarding future drilling or re-working operations which could
impact the oil and natural gas production on the leases on which Tidelands has an overriding
royalty interest.
Summary of Operating Results
During the six months ended June 30, 2010, Tidelands realized approximately 77% of its royalty
income from the sale of natural gas and approximately 23% of its royalty income from the sale of
oil. Royalty income includes royalties from oil and natural gas received from producers.
Tidelands generates a significant percentage of its natural gas royalty income from the West
Cameron Block 165 Field. For the six months ended June 30, 2010, royalties received from this
field decreased 50% as compared to the six
month period ended June 30, 2009 primarily due to the lack of demand for natural gas due to
weather, the economic recession and the natural decline due to depletion.
Distributable income per unit for the six months ended June 30, 2010 decreased to $0.79 from
$1.18 for the comparable period in 2009. Distributions per unit amounted to $0.89 for the six
months ended June 30, 2010, a decrease from $1.41 for the comparable period in 2009. During the
six months ended June 30, 2010, the difference between distributable income per unit and
distributions per unit resulted from timing differences between the closing of the financial
statements and the determination date of the distribution amount to unitholders.
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For the six months ended June 30, 2010, oil production increased 1,392 barrels and natural gas
production decreased 131,236 thousand cubic feet (mcf) from the levels realized in the comparable
period in 2009. For the six months ended June 30, 2010, the average price realized for a barrel of
oil increased $34.84 from the price realized in the comparable period in 2009, and the average
price realized for an mcf of natural gas increased $0.05 from the price realized in the comparable
period in 2009.
The following table presents the net production quantities of oil and natural gas and
distributable income and distributions per unit for the last six quarters.
Net Production Quantities | Distributable | Distribution | ||||||||||||||
Quarter | Oil (bbls) | Natural Gas (mcf) | Income per Unit | per Unit | ||||||||||||
March 31, 2009 |
631 | 167,068 | $ | 0.79 | $ | 0.86 | ||||||||||
June 30, 2009 |
1,568 | 117,135 | $ | 0.39 | $ | 0.55 | ||||||||||
September 30, 2009 |
2,990 | 137,491 | $ | 0.52 | $ | 0.41 | ||||||||||
December 31, 2009 |
1,473 | 92,186 | $ | 0.34 | $ | 0.44 | ||||||||||
March 31, 2010 |
1,876 | 89,574 | $ | 0.46 | $ | 0.45 | ||||||||||
June 30, 2010 |
1,715 | 63,393 | $ | 0.33 | $ | 0.44 |
Results of Operations Three Months Ended June 30, 2010 and 2009
Income from oil and natural gas royalties decreased $108,420 to $525,991 during the three
months ended June 30, 2010 from $634,411 realized in the comparable quarter of 2009. Oil
production increased on Sabine Pass Block 13, while natural gas production decreased on West
Cameron Block 165.
Distributable income decreased to $456,320 for the three-month period ended June 30, 2010 from
$548,452 realized in the comparable period in 2009.
Income from oil royalties increased to $135,845 for the three-month period ended June 30,
2010 from $66,840 realized in the comparable period in 2009. The volume of oil sold increased 147
barrels, while the average price realized for oil increased to $79.21 for the three-month period
ended June 30, 2010 from $42.63 realized in the comparable period in 2009.
Income from natural gas royalties decreased to $390,146 for the three-month period ended June
30, 2010 from $567,571 realized in the corresponding period in 2009. The volume of natural gas
sold decreased 53,742 mcf. The average price of natural gas increased $1.30 per mcf, to $6.15 from
$4.85 realized in the comparable period in 2009.
The following table presents the quantities of oil and natural gas sold and the average price
realized from current operations for the three months ended June 30, 2010 and those realized in the
comparable three months in 2009.
Three Months Ended June 30, | ||||||||||||
2010 | 2009 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Barrels sold |
1,715 | 1,568 | 9 | % | ||||||||
Average price |
$ | 79.21 | $ | 42.63 | 86 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
63,393 | 117,135 | (46 | )% | ||||||||
Average price |
$ | 6.15 | $ | 4.85 | 27 | % |
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General and administrative expenses decreased to $68,471 in the three months ended June 30,
2010 from $85,235 in the prior year period, primarily due to lower professional fees and expenses.
Results of Operations Six Months Ended June 30, 2010 and 2009
Income from oil and natural gas royalties decreased $597,899 to $1,208,588 during the six
months ended June 30, 2010 from $1,806,487 realized in the comparable period of 2009. Oil
production increased on Sabine Pass Block 13, while natural gas production was down on West Cameron
Block 165.
Distributable income decreased to $1,092,815 for the six-month period ended June 30, 2010 from
$1,636,840 realized in the comparable period in 2009.
Income from oil royalties increased to $278,423 for the six-month period ended June 30, 2010
from $93,866 realized in the comparable period in 2009. The volume of oil sold increased 1,392
barrels, while the average price realized for oil increased $34.84 per barrel to $77.53 for the
six-month period ended June 30, 2010 from $42.69 realized in the comparable period in 2009.
Income from natural gas royalties decreased to $930,165 for the six-month period ended June
30, 2010 from $1,712,621 realized in the corresponding period in 2009. The volume of natural gas
sold decreased 131,236 mcf. The average price of natural gas increased $0.05 per mcf to $6.08 from
$6.03 realized in the comparable period in 2009.
The following table presents the quantities of oil and natural gas sold and the average price
realized from current operations for the six months ended June 30, 2010, and those realized in the
comparable six months in 2009.
Six Months Ended June 30, | ||||||||||||
2010 | 2009 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Barrels sold |
3,591 | 2,199 | 63 | % | ||||||||
Average price |
$ | 77.53 | $ | 42.69 | 82 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
152,967 | 284,203 | (46 | )% | ||||||||
Average price |
$ | 6.08 | $ | 6.03 | 1 | % |
General and administrative expenses decreased to $112,573 in the six months ended June 30,
2010 from $161,204 in the prior year period, primarily due to lower professional fees and expenses.
Forward-Looking Statements
The statements discussed in this Quarterly Report on Form 10-Q regarding Tidelands future
financial performance and results, and other statements that are not historical facts, are
forward-looking statements as defined in Section 27A of the Securities Act of 1933. This report
uses the words may, expect, anticipate, estimate,
believe, continue, intend, plan, budget, or other similar words to identify
forward-looking statements. You should read statements that contain these words carefully because
they discuss future expectations, contain projections of Tidelands financial condition, and/or
state other forward-looking information. Actual results may differ from expected results because
of: reductions in prices or demand for oil and natural gas, which might then lead to decreased
production; reductions in production due to the depletion of existing wells or disruptions in
service, which may be caused by storm damage to production facilities, blowouts or other production
accidents, or geological changes such as cratering of productive formations; changes in
regulations; and the expiration or release of leases subject to Tidelands interests. Additional
risks are set forth in Tidelands Annual Report on Form 10-K for the year ended December 31, 2009.
Events may occur in the future that Tidelands is unable to accurately predict, or over which it has
no control. If one or more of these uncertainties materialize, or if underlying assumptions prove
incorrect, actual outcomes may vary materially from those forward-looking statements included in
this Quarterly Report on Form 10-Q.
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Website
Tidelands has an Internet website and has made available Tidelands Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports,
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), at www.tirtz-tidelandsroyaltytrust.com. Each of these reports
will be posted on this website as soon as reasonably practicable after such report is
electronically filed with or furnished to the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Tidelands did not experience any significant changes in market risk during the period covered
by this Quarterly Report on Form 10-Q. Tidelands market risk is described in more detail in Item
7A: Quantitative and Qualitative Disclosures About Market Risk in Tidelands Annual Report on Form
10-K for the year ended December 31, 2009.
Item 4T. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
U.S. Trust, Bank of America Private Wealth Management, as Trustee of the Trust, is responsible
for establishing and maintaining Tidelands disclosure controls and procedures. These controls and
procedures are designed to ensure that material information relating to Tidelands is communicated
to the Trustee. As of the end of the period covered by this Quarterly Report on Form 10-Q, the
Trustee carried out an evaluation of the effectiveness of the design and operation of Tidelands
disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based
upon that evaluation, the Trustee concluded that Tidelands disclosure controls and procedures were
effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There has not been any change in Tidelands internal control over financial reporting during
the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is
reasonably likely to materially affect, Tidelands internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
As of the date of this filing, there have been no material changes from the risk factors
previously disclosed under the heading Risk Factors in Tidelands Annual Report filed on Form
10-K for the year ended December 31, 2009.
Item 6. Exhibits
The following exhibits are included herein:
31.1 | Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of the Corporate Trustee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TIDELANDS ROYALTY TRUST B U.S. Trust, Bank of America Private Wealth Management, Trustee |
||||
August 6, 2010 | By: | /s/ Ron E. Hooper | ||
Ron E. Hooper | ||||
Senior Vice President |
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