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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] 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 0-8677
TIDELANDS ROYALTY TRUST "B"
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-6007863
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
NATIONSBANK OF TEXAS, N.A. 75283-0241
P.O. BOX 830241, DALLAS, TEXAS (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code (800) 985-0794
None
(Former name, former address and former fiscal year
if changed since last report)
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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 X No _____
Indicate number of units of beneficial interest outstanding as of the last
practicable date.
<TABLE>
<CAPTION>
Title of Each Class of Units Number of Units of Beneficial Interest
of Beneficial Interest September 30, 1996
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<S> <C>
UNITS OF BENEFICIAL INTEREST 1,386,375
</TABLE>
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PART I. FINANCIAL INFORMATION
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
<CAPTION>
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................ $1,815,237 $1,706,767
Oil and gas royalties receivable................................. 158,534 198,395
Federal income taxes refundable.................................. 7,001 --
---------- ----------
Total current assets..................................... $1,980,772 $1,905,162
---------- ----------
Oil, gas and other mineral properties.............................. 2 2
---------- ----------
$1,980,774 $1,905,164
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable................................................. $ 983,774 $ 984,941
Income distributable to unitholders.............................. 278,158 231,749
Federal income taxes payable..................................... -- 374
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Total current liabilities................................ $1,261,932 $1,217,064
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Trust Equity:
Corpus -- authorized 1,386,525 units of beneficial interest,
issued 1,386,375 units at nominal value....................... $ 2 $ 2
Undistributed income............................................. 718,840 688,098
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Total trust equity....................................... 718,842 688,100
---------- ----------
$1,980,774 $1,905,164
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Oil and gas royalties......................... $217,433 $278,542 $855,740 $696,687
Interest and other............................ 18,535 19,819 54,014 60,062
-------- -------- -------- --------
$235,968 $298,361 $909,754 $756,749
-------- -------- -------- --------
Expenses:
Production and other taxes.................... -- -- 620 620
General and administrative.................... 12,909 9,478 62,982 59,256
-------- -------- -------- --------
Total expenses........................ 12,909 9,478 63,602 59,876
-------- -------- -------- --------
Income before Federal income taxes............ 223,059 288,883 846,152 696,873
Federal income taxes of subsidiary............ 4,200 5,000 12,800 12,652
-------- -------- -------- --------
Net income............................ $218,859 $283,883 $833,352 $684,221
======== ======== ======== ========
Net income per unit............................. $.16 $.20 $.60 $.49
==== ==== ==== ====
Distributions per unit.......................... $.20 $.16 $.58 $.53
==== ==== ==== ====
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 833,352 $ 684,221
Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets and liabilities:
Accounts receivable.......................................... 39,861 (8,816)
Federal income taxes......................................... (7,001) (376)
Accounts payable............................................. (1,167) (2,043)
Federal taxes payable........................................ (374) (3,993)
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Net cash provided by operating activities................. 864,671 668,993
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Cash flows from financing activities -- distributions to
unitholders....................................................... (756,201) (746,605)
Net increase (decrease) in cash and cash equivalents.............. 108,470 (77,612)
Cash and cash equivalents at beginning of period.................... 1,706,767 1,758,143
---------- ----------
Cash and cash equivalents at end of period.......................... $1,815,237 $1,680,531
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
ACCOUNTING POLICIES
The financial statements include the financial statements of Tidelands
Royalty Trust B (the "Trust") and its wholly-owned subsidiary, are condensed,
and should be read in conjunction with the annual report for the fiscal year
ended December 31, 1995. The financial statements included herein are unaudited,
but in the opinion of management include all adjustments necessary for a fair
presentation of the results of operations for the periods indicated.
UNDISTRIBUTED INCOME
Undistributed income as of September 30, 1996 consisted of $260,431
applicable to the Trust and $458,409 applicable to Tidelands Royalty B
Corporation, the Trust's wholly-owned subsidiary. Distributions to unitholders
are dependent on the volume and price of oil and gas sold by others and will
fluctuate from quarter to quarter.
ACCOUNTS PAYABLE
Accounts payable of $556,942 have been provided to cover refunds that may
be required upon redetermination of gas prices for royalty payments in prior
periods and $421,214 has been reserved for possible overpayments received on
production payments, which amounts have been substantially supplied by Tidelands
Royalty B Corporation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES
The Trust is a "royalty trust" with overriding royalty interests in oil and
gas leases in the Gulf of Mexico. The Trust's indenture (and the charter and
by-laws of its subsidiary) expressly prohibit the operation of any kind of trade
or business. All royalties received by the Trust, less administrative expenses,
are distributed quarterly to unitholders. Since the Trust's sole purpose is to
collect and distribute cash collected from royalties, there are no requirements
for capital.
GENERAL
Net income for the nine months ended September 30, 1996 amounted to $.60
per unit, an increase of $.11 over the $.49 realized in the comparable period a
year ago. Cash distributions to unitholders amounted to $.58 per unit in the
current period, up $.05 from the $.53 per unit distributed in the comparable
period a year ago.
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The Trust realizes most of its income from the sale of natural gas, which
sales accounted for approximately 90% of income in the current nine month period
as compared to approximately 88% in the comparable period last year. Revenue
from the sale of oil was responsible for approximately 10% of the Trust's income
in the current nine month period, down from approximately 12% in the comparable
period last year.
Three wells were drilled during the current quarter on leases in which
Tidelands owns an overriding royalty interest. CNG Producing Company drilled and
completed two wells. Well No. A-2(ST) on West Cameron Block 229 was drilled and
completed as a gas well and Well No. 5 on West Cameron Block 225 was drilled and
tested but the results of the test were not reported. Berlington Resources
drilled Well No. 4 on Galveston Block 303 and at last report was in the process
of completing and testing the well.
The Trust's revenues are derived from the oil and gas production activities
of unrelated parties. The Trust's revenues and distributions fluctuate from
period to period based upon factors beyond the Trust's control, including
without limitation the number of leases bid on and obtained by parties subject
to the contract between the Trust's predecessors and Gulf Oil Corporation dated
April 30, 1951 (The "1951 Contract"), the number of productive wells drilled and
maintained on leases subject to the Trust's interest, the level of production
over time from such wells and the prices at which the oil and gas from such
wells is sold. The Trust believes that it will continue to have revenues
sufficient to permit distributions to be made to unitholders for the foreseeable
future, although no assurance can be made regarding the amounts thereof. The
foregoing sentence is a forward-looking statement. Factors that might cause
actual results to differ from expected results include reductions in prices or
demand for oil and gas, which might then lead to decreased production;
reductions in production due to depletion of existing wells or disruptions in
service, including as the result of storm damage, blowouts or other production
accidents, and geological changes such as cratering of productive formations;
expiration or release of leases subject to the Trust's interests; and the
discontinuation by parties subject to the 1951 Contract of their efforts to
obtain leases in the area that is subject to the Trust's interests.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED SEPTEMBER 30, 1996
Income from oil and gas royalties decreased approximately 22% in the
current quarter as compared to the comparable quarter last year. Natural gas
production decreased approximately 35% from a year ago and oil production
decreased approximately 42%. The average price received for natural gas in the
current quarter increased approximately 20% to $1.98 from $1.64 realized last
year. The average price for oil increased approximately 23% to $13.79 from
$11.23 realized last year. The increased prices did not entirely offset the
decline in production.
Over 80% of the Trust's income for the current quarter is from royalties on
gas and condensate produced from the West Cameron Block 165 Field and the High
Island Block 128 Field. These two fields currently have 4 wells producing gas
and condensate. Two of the wells, one on West Cameron Block 165 and the other on
High Island Block 128 account for a major portion of the production from these
two fields. The well on the West Cameron Block 165 Field first produced in 1993
and the well on the High Island Block 128 Field first produced in 1989 but was
recompleted in a different formation in 1995.
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The quantities of oil and gas sold and the average prices for oil and gas
for the three months ended September 30, 1996, and those recorded for the
comparable 1995 period, are presented in the following table:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
OIL
Barrels sold................................................ 1,875 3,224
Average price............................................... $13.79 $11.23
NATURAL GAS
mcf sold.................................................... 96,611 147,908
Average price............................................... $1.98 $1.64
</TABLE>
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1996
Income from oil and gas royalties increased approximately 23% in the
current nine month period as compared to the comparable period last year. Higher
natural gas prices and increased oil production accounted for most of the
increase. The average price for natural gas increased approximately 45% to $2.27
from $1.57 realized last year. The average price for oil increased approximately
12% to $14.44 from $12.86 realized last year.
The quantities of oil and gas sold and the average prices for oil and gas
for the nine months ended September 30, 1996, and those recorded for the
comparable 1995 period, are presented in the following table:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
OIL
Barrels sold................................................ 6,176 6,605
Average price............................................... $14.44 $12.86
NATURAL GAS
mcf sold.................................................... 337,134 390,109
Average price............................................... $2.27 $1.57
</TABLE>
PART II. OTHER INFORMATION
There were no events reportable under Part II of the Quarterly Report on
Form 10-Q.
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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"
NationsBank of Texas, N.A., Trustee
November 12, 1996 By: /s/ PATRICIA COX
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Patricia Cox
Vice President
November 12, 1996 /s/ R. RAY BELL
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R. Ray Bell
Principal Accounting Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<C> <S>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,815,237
<SECURITIES> 0
<RECEIVABLES> 158,534
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,980,772
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,980,774
<CURRENT-LIABILITIES> 1,261,932
<BONDS> 0
<COMMON> 2
0
0
<OTHER-SE> 718,840
<TOTAL-LIABILITY-AND-EQUITY> 1,980,774
<SALES> 855,740
<TOTAL-REVENUES> 909,754
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 846,152
<INCOME-TAX> 12,800
<INCOME-CONTINUING> 833,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 833,352
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
