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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 JUNE 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 June 30, 1996
- ----------------------------------------- ---------------------------------------------
<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
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
<CAPTION>
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................ $1,819,636 $1,706,767
Oil and gas royalties receivable................................. 231,137 198,395
Federal income taxes refundable.................................. 6,476 --
---------- ----------
Total current assets..................................... $2,057,249 $1,905,162
---------- ----------
Oil, gas and other mineral properties.............................. 2 2
---------- ----------
$2,057,251 $1,905,164
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable................................................. $ 984,727 $ 984,941
Income distributable to unitholders.............................. 294,384 231,749
Federal income taxes payable..................................... -- 374
---------- ----------
Total current liabilities................................ $1,279,111 $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............................................. 778,138 688,098
---------- ----------
778,140 688,100
---------- ----------
Total trust equity....................................... $2,057,251 $1,905,164
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Oil and gas royalties......................... $345,358 $156,819 $638,307 $418,145
Interest and other............................ 17,694 20,880 35,479 40,243
-------- -------- -------- --------
$363,052 $177,699 $673,786 $458,388
-------- -------- -------- --------
Expenses:
Production and other taxes.................... -- -- 620 620
General and administrative.................... 30,397 27,977 50,073 49,778
-------- -------- -------- --------
Total expenses........................ 30,397 27,977 50,693 50,398
-------- -------- -------- --------
Income before Federal income taxes............ 332,655 149,722 623,093 407,990
Federal income taxes of subsidiary............ 4,825 3,652 8,600 7,652
-------- -------- -------- --------
Net income............................ $327,830 $146,070 $614,493 $400,338
======== ======== ======== ========
Net income per unit............................. $.24 $.11 $.44 $.29
==== ==== ==== ====
Distributions per unit.......................... $.21 $.18 $.38 $.37
==== ==== ==== ====
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 614,493 $ 400,338
Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets and liabilities:
Accounts receivable.......................................... (32,742) 42,315
Federal income taxes......................................... (6,476) (2,126)
Accounts payable............................................. (214) (3,968)
Federal taxes payable........................................ (374) (3,993)
---------- ----------
Net cash provided by operating activities................. 574,687 432,566
---------- ----------
Cash flows from financing activities -- distributions to
unitholders....................................................... (461,818) (491,032)
Net increase (decrease) in cash and cash equivalents.............. 112,869 (58,466)
Cash and cash equivalents at beginning of period.................... 1,706,767 1,758,143
---------- ----------
Cash and cash equivalents at end of period.......................... $1,819,636 $1,699,677
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1996 consisted of $337,659 applicable
to the Trust and $440,479 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 six months ended June 30, 1996 amounted to $.44 per
unit, an increase of $.15 over the $.29 realized in the comparable period a year
ago. Cash distributions to unitholders amounted to $.38 per unit in the current
period, up $.01 from the $.37 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 six 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
six month period, down from approximately 12% in the comparable period last
year.
There were no drilling operations reported during the current six-month
period. However, a permit has been issued to CNG Producing for a well to be
drilled in the West Cameron Block 225 Field. The Trust has a 1.04% overriding
royalty interest in the block where the well is to be located.
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 JUNE 30, 1996
Income from oil and gas royalties increased approximately 120% in the
current quarter as compared to the comparable quarter last year. Higher natural
gas prices and increased gas production accounted for this increase. The average
price for natural gas increased approximately 86% to $2.64 from $1.42 realized
last year. The average price for oil increased approximately 11% to $16.16 from
$14.62 realized last year.
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 June 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.................................................. 2,216 2,442
Average Price................................................. $16.16 $14.62
NATURAL GAS
mcf sold...................................................... 117,286 85,379
Average price................................................. $2.64 $1.42
</TABLE>
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1996
Income from oil and gas royalties increased approximately 53% in the
current six month period as compared to the comparable six month 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 56%
to $2.39 from $1.53 realized last year. The average price for oil increased
approximately 2% to $14.72 from $14.42 realized last year. Royalties from the
sale of oil increased due to an approximately 27% increase in the volume of oil
produced and sold.
The quantities of oil and gas sold and the average prices for oil and gas
for the six months ended June 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.................................................. 4,301 3,381
Average Price................................................. $14.72 $14.42
NATURAL GAS
mcf sold...................................................... 240,523 242,201
Average price................................................. $2.39 $1.53
</TABLE>
PART II. OTHER INFORMATION
Mr. L.C. Paslay, the Individual Trustee of the Trust, has notified the
Trust that he is resigning his position as Individual Trustee. Management of the
Trust understands that Mr. Palsay, who is 87 years of age, is resigning for
personal reasons. Pursuant to Section 5 of Article VI of the Indenture under
which the Trust was created, Mr. Charles G. McBurney will become the Individual
Trustee of the Trust. Mr. Palsay's resignation as Individual Trustee will be
effective on October 21, 1996.
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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
August 5, 1996 By: /s/ PATRICIA COX
--------------------------------
Patricia Cox
Vice President
August 5, 1996 /s/ R. RAY BELL
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R. Ray Bell
Principal Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ------------------ ----------------------------------------------------------
<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> JUN-30-1996
<CASH> 1,819,636
<SECURITIES> 0
<RECEIVABLES> 231,137
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,057,251
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,057,251
<CURRENT-LIABILITIES> 1,279,111
<BONDS> 0
<COMMON> 2
0
0
<OTHER-SE> 778,138
<TOTAL-LIABILITY-AND-EQUITY> 2,057,251
<SALES> 638,307
<TOTAL-REVENUES> 673,786
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 623,093
<INCOME-TAX> 8,600
<INCOME-CONTINUING> 614,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614,493
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
