<PAGE> 1
- --------------------------------------------------------------------------------
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
/ / FOR THE TRANSITION PERIOD FROM TO
.
COMMISSION FILE NO. 0-8677
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.)
C/O THE CORPORATE TRUSTEE:
NATIONSBANK OF TEXAS, N.A.
P.O. BOX 830241, DALLAS, TEXAS 75283-0241
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(at the office of the Corporate Trustee): (800) 985-0794
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF BENEFICIAL INTEREST
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. /X/
Aggregate market value of the Units of Beneficial Interest held by
non-affiliates of the Registrant at March 1, 1996: $6,071,059.
Number of Units of Beneficial Interest outstanding as of the close of the
period covered by this report: December 31, 1995 -- 1,386,375 Units.
Documents incorporated by reference:
NONE
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<PAGE> 2
CROSS REFERENCE SHEET
This Form 10-K for the year ended December 31, 1995, of Tidelands Royalty
Trust "B" is not organized by conventional item numbers and headings
contemplated by Securities and Exchange Commission rules. This cross-reference
page is intended to indicate to the reader where (or under which headings)
information required under Form 10-K may be found herein.
<TABLE>
<CAPTION>
FORM 10-K
ITEM NUMBERS HEADINGS HEREIN
- ------------- ---------------
<S> <C> <C>
PART I ........................................................ General
Item 1. Business............................................... The Trust, Properties
Item 2. Properties............................................. Properties
Item 3. Legal Proceedings...................................... Legal Matters
Item 4. Submission of Matters to a Vote
of Security Holders.................................. Unitholder Voting Matters
PART II ........................................................ Financial
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.......................... Market and Investor Information
Item 6. Selected Financial Data................................ Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data............ Financial Statements and
Supplementary Data
Item 9. Disagreements on Accounting and Financial
Disclosure........................................... Accounting Matters
PART III. ....................................................... Management and Principal
Unitholders
Item 10. Directors and Executive Officers of the
Registrant........................................... Administrators
Item 11. Executive Compensation................................. Management Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................... Principal Unitholders
Item 13. Certain Relationships and Related
Transactions......................................... Management Compensation
Miscellaneous
PART IV ........................................................
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K
</TABLE>
<PAGE> 3
GENERAL
THE TRUST
Organization. Tidelands Royalty Trust "B" ("Tidelands") is a royalty trust
created on June 1, 1954, under the laws of the State of Texas. Tidelands is not
permitted to engage in any business activity inasmuch as 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 any oil, 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 Tidelands'
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 Corporation ("Chevron"), Elf Acquitane, Inc.
("Elf"), and their assignees.
The Tidelands Royalty Trust "B" Indenture, effective June 1, 1954, as
amended (the "Indenture"), provides that the corporate trustee is to distribute
all cash in Tidelands, less an amount reserved for the 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. NationsBank
of Texas, N.A. serves as corporate trustee and Mr. L. C. Paslay serves as
individual trustee.
The Indenture also provides that the term of the royalty trust created to
hold the rights under the 1951 Contract will expire on April 30, 2001 unless
extended by the vote of the holders of a majority of the outstanding units of
beneficial interest. See "Unitholder Voting Matters" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."
Tidelands' wholly-owned subsidiary, Tidelands Royalty "B" Corporation
("Tidelands Corporation"), holds title to interests in properties subject to the
1951 Contract that are situated offshore of Louisiana. Ninety-five percent of
all oil, gas, and other mineral royalties collected by this subsidiary are paid
to Tidelands. Tidelands Corporation, like Tidelands, is prohibited from engaging
in a trade or business and does only those things necessary for the
administration and liquidation of its properties.
Tidelands' only industry segment or purpose is the administration and
collection of royalties.
The Contract. The 1951 Contract identifies 60 specific tracts in the Gulf
of Mexico. These tracts are not all the same size and collectively contain
approximately 1,370,000 acres (sometimes referred to herein as the "Royalty
Area"). If Chevron or Elf acquires a lease or leases on one of the 60 tracts
before April 30, 2001, and if oil or gas is produced and sold from any such
tract, then Chevron or Elf, as the case may be, will make production payments to
Tidelands in an amount equal to approximately 12.5% of the value of the oil and
gas sold from such tract until the sum of $1,500,000 has been paid on such
tract. Thereafter, Tidelands' interest in such tract will be converted to an
overriding royalty and Tidelands will receive payments equal to approximately
4.17% of the value of the oil and gas sold as long as the lease on such tract
exists. This interest applies to each of the 60 tracts that constitute the
Royalty Area. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Review and Outlook."
As of December 31, 1995, Chevron and others held interests in nine leases
subject to Tidelands' interests in seven of the 60 tracts in the Royalty Area.
Leases on all seven of such tracts contain currently-producing or shut-in wells
subject to Tidelands' interests.
The 1951 Contract provides that any assignment by Gulf (currently Chevron
and Elf) of any leases acquired by it in the Royalty Area and any assignment of
the information, data or records acquired under the 1951 Contract shall be made
subject to the production payments and the overriding royalty interests provided
therein. Chevron has assigned to other operators Chevron's interest in eight
leases covering 32,121 acres in the Royalty Area. Chevron has retained an
interest in one lease covering 4,364 acres in the Royalty Area. See Note 1 of
Notes to Consolidated Financial Statements.
<PAGE> 4
The terms of the 1951 Contract also apply to the sale of minerals other
than oil and natural gas. However, there is no production payment due with
respect to these other minerals: the interest in other minerals is limited to an
approximately 4.17% overriding royalty.
In 1995, approximately 10% of Tidelands' production payment and royalty
revenues were attributable to oil and approximately 90% were attributable to
natural gas. The production payments and royalty revenues received by the Trust
in respect of natural gas production are affected by seasonal fluctuations in
demand for natural gas. Royalty revenue received from Chevron accounted for
approximately 19%, 24% and 54% of total royalty revenue for the years ended
December 31, 1995, 1994 and 1993, respectively. Royalty revenue received from
Pennzoil Exploration and Production Company totaled approximately 63% and 59%
for the years ended December 31, 1995 and 1994, respectively.
Tidelands derives no revenues from foreign sources and has no export sales.
Tidelands and Tidelands Corporation have no direct employees, although
Tidelands pays a portion of certain administrative expenses (including a portion
of the salary and expense of one individual). See "Management and Principal
Unitholders."
PROPERTIES
General. Tidelands is not engaged in oil and gas operations, even though
its income is based on oil and gas operations of others. Tidelands' only
income-producing property is the 1951 Contract, including the property interests
granted thereunder, which provides that payments in the nature of production
payments and overriding royalties will be made to Tidelands based on oil and gas
sales from certain leases in the Royalty Area in the Gulf of Mexico. Tidelands
does not own or directly lease any physical properties.
Reserves. Tidelands' production payments and overriding royalties are
carved out of working interests in certain oil and gas leases in the Gulf of
Mexico. Tidelands does not have engineering data necessary to make an estimate
of the proved oil and gas reserves attributable thereto and is not entitled to
receive such data from the operators and/or owners of the working interests from
which Tidelands' interests are derived.
Since Tidelands does not have access to this reserve information, Tidelands
is unable to compute the standardized measure of discounted future net cash
flows therefrom.
No reports on oil and gas reserves were filed with any federal authority or
agency during 1995 by Tidelands.
Production. Information concerning net quantities of oil and gas produced
for each of the last three fiscal years, as well as the average sales price per
unit of oil and gas produced upon which payments to Tidelands are based, is set
forth below in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Quantity of royalty oil and gas sold
Oil (in barrels ("bbls"))...................... 7,804 7,899 12,831
Gas (in thousand cubic feet ("mcf"))........... 540,597 778,517 1,938,104
Weighted average sales price
for royalty oil and gas sold
Oil (per bbl)(1)............................... $12.61 $11.14 $13.95
Gas (per mcf).................................. $ 1.63 $ 1.88 $ 1.98
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
Information about average production cost (lifting cost) per unit of
production has been omitted due to its unavailability and inapplicability to
Tidelands. For more recent information regarding crude oil sales prices, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below.
2
<PAGE> 5
Interests in Properties. Tidelands' properties consist of production
payments and overriding royalty interests in 9 oil and gas leases covering
36,485 gross acres in the 1,370,000 acre Royalty Area. These leases are located
in the Gulf of Mexico in the Galveston, High Island, Sabine Pass and West
Cameron areas. In addition to interests in these existing leases, Tidelands is
entitled to receive an interest in any lease obtained before April 30, 2001, by
Chevron or Elf in the Royalty Area.
Set forth in the table below is certain information concerning gross
productive oil and gas wells and gross leased acres in which Tidelands owns its
interests:
<TABLE>
<S> <C>
Gross Productive Wells --
Oil............................................... 3
==
Gas............................................... 10
==
Gross Leased Acres --
Productive........................................ 36,485
======
</TABLE>
Information regarding net wells or acres is not included since Tidelands
does not own any working interests.
Productive Properties. Productive properties cover 36,485 gross acres under
9 different leases. These 9 leases contain 13 single completion wells. Three of
these completions produce oil, and 10 have been completed to produce natural gas
and condensate. See "Present Activities."
The following table contains information about the average daily production
attributable to Tidelands' interest, by field, for the six month period from
January 1995 through June 1995. Only fields that were producing at the end of
the year are listed. The information in the table is based upon data obtained
from the Petroleum Information Corporation. Production from these fields
accounted for substantially all of Tidelands' distributable income in 1995.
<TABLE>
<CAPTION>
NET MCF
YEAR GAS & OIL
FIRST EQUIVALENT
FIELD PRODUCED PER DAY(1)
----- -------- -----------
<S> <C> <C>
Offshore Texas
Galveston Block 303............................................... 1987 143
High Island Block 128............................................. 1989 190
Offshore Louisiana
Sabine Pass Block 13.............................................. 1981 80
West Cameron Block 165............................................ 1969 946
West Cameron Block 333............................................ 1978 84
</TABLE>
- ---------------
(1) Net oil production is reflected in the amount of its mcf equivalent of
natural gas on a btu basis.
Royalty Area. The State of Texas and the United States own all the mineral
rights in the Royalty Area and possess the exclusive right to lease their
respective areas for oil, gas and other mineral development. Leases are granted
on the basis of sealed competitive bids at sales held on specified dates.
Companies other than Chevron and Elf have acquired leases in the Royalty Area
and it is estimated that these other operators have leased approximately 740,000
of the 1,370,000 acres therein. This leaves approximately 630,000 acres
available for leasing in the Royalty Area. The bulk of the unleased acreage is
located in an area about 50 miles southeast of Galveston, Texas.
Drilling Results. There were no wells drilled in 1995, 1994 or 1993 on any
lease in which Tidelands has an interest.
Present Activities. Tidelands currently receives royalties from oil and
natural gas sold from 7 of the 9 producing leases in the Royalty Area, although
delivery quantities are subject to seasonal demand.
3
<PAGE> 6
During 1995, Chevron and Elf did not bid on any lease located in the
Royalty Area in the two federal lease sales held that year. One undeveloped
lease (covering 5,760 acres) in the Royalty Area expired and two
previously-producing leases (covering 5,745 acres) in the Royalty Area were
released during 1995.
The Minerals Management Service of the United States Department of the
Interior has called for bids in a lease sale to be held in the Central Gulf area
on April 24, 1996. The sale covers a portion of the Royalty Interest that lies
in the West Cameron area. The unleased tracts in the portion of the Royalty Area
located in the West Cameron area cover approximately 130,000 acres.
Tidelands is not obligated to provide any fixed and determinable quantities
of oil or gas in the future under any existing contracts or agreements.
Difficulty in Obtaining Certain Data. Tidelands' only activities are the
collection and distribution of revenues from production payments and overriding
royalties on certain oil and gas leases in the Gulf of Mexico, pursuant to
agreements between Tidelands' predecessors and Gulf and its transferees and
assignees. The leases that are subject to the interests held by Tidelands are
owned by Chevron or other oil and gas production and development companies.
Certain information as to reserves, availability of oil and gas, development
plans for undeveloped acreage, and other matters, with respect to the particular
leases subject to Tidelands' interests lies solely within the knowledge of these
other companies. Engineering data, if any, regarding these leaseholds would have
been compiled principally by or for the operators of these leaseholds and
Tidelands believes that it would not be provided access to such information.
Because of this, it appears that unreasonable effort and expense would be
involved in seeking to obtain all the information set forth under applicable
Securities and Exchange Commission rules and guides.
Furthermore, certain information concerning net acreage and net wells has
been omitted due to the nature of Tidelands' interests (i.e., production
payments and overriding royalties) in such leaseholds. Also, certain information
concerning drilling results specified in Guide 2 of Securities Exchange Act of
1934 Industry Guides has been omitted since Tidelands has no control over
exploration decisions and such information is thus deemed irrelevant in
discussing operations within the control of Tidelands' administrators.
LEGAL MATTERS
Neither Tidelands nor Tidelands Corporation, nor any of their respective
properties, is a party to or subject to any material pending litigation as of
the date hereof.
4
<PAGE> 7
UNITHOLDER VOTING MATTERS
During 1995, no matter was submitted by Tidelands to a vote of its
unitholders.
Under the terms of the Indenture, the unitholders are limited solely to the
following rights and powers with respect to their units: (1) to elect a
replacement Trustee by vote of the holders of a majority of the outstanding
units of beneficial interest for any Trustee vacancy occurring; (2) to inspect
the books and records of Tidelands at reasonable intervals and during reasonable
business hours; (3) by vote of the holders of a majority of the outstanding
units of beneficial interest, to extend the term of Tidelands for consecutive
twenty (20) year intervals; (4) by vote of the holders of a majority of the
outstanding units of beneficial interest, to create one or more corporations to
receive and hold title to Tidelands' assets, provided that there is no objecting
unitholder; (5) to terminate Tidelands so long as the holders of eighty percent
(80%) of the outstanding units of beneficial ownership consent; (6) to remove
the Trustees or their successors by vote of the holders of a majority of the
outstanding units of beneficial interest; (7) with the consent of the holders of
ten percent (10%) of the outstanding units of beneficial ownership, to call a
meeting of the unitholders in order to take any action that may be validly taken
by the unitholders; and (8) to amend the Indenture, so long as the holders of
eighty percent (80%) of the outstanding units of beneficial ownership consent,
provided that (a) no amendment shall change the nature of Tidelands from that of
a purely ministerial trust, (b) there shall be no change in the rights, duties,
or responsibilities of either Trustee without the consent of such Trustee, and
(c) there shall be no change in the purpose of Tidelands or in the substantive
rights of unitholders if one unitholder objects. Under the Indenture, the
unitholders are not permitted to exercise any additional powers with respect to
the management or operation of Tidelands.
The Indenture provides that the sole interest of each unitholder during the
existence of Tidelands shall be his right to receive his proportionate part of
the net proceeds in the form of money in the hands of the corporate trustee that
such unitholder is entitled to receive, and upon termination of Tidelands, to
receive conveyances or assignments of his share of the property then
constituting the trust estate. No unitholder has the right to call for or demand
or secure any partition during the existence of Tidelands.
5
<PAGE> 8
FINANCIAL
MARKET AND INVESTOR INFORMATION
Tidelands is authorized to issue 1,386,525 units of beneficial interest;
1,386,375 units were held by 487 unitholders of record as of December 31, 1995.
The remaining 150 units are reserved to be issued to specific parties if and
when they decide to transfer their rights under the 1951 Contract to Tidelands.
There were no changes in the number of outstanding units of beneficial interest
during 1995.
The units of beneficial interest in Tidelands trade on The NASDAQ Smallcap
Market. They are included in the NASDAQ system under the symbol "TIRZC". The
following table presents information obtained from the National Quotation
Bureau, Inc. as to the high and low bid prices and includes distributions to
unitholders, by quarter, for the past two years:
<TABLE>
<CAPTION>
BID QUOTATION DISTRI-
CALENDAR ------------------ BUTIONS
YEAR HIGH LOW (PER UNIT)
- -------- ------- ------- ----------
<S> <C> <C> <C> <C>
1995
First quarter........................................... $ 8.50 $ 6.50 $ .18
Second quarter.......................................... 7.75 6.50 .18
Third quarter........................................... 7.50 6.00 .16
Fourth quarter.......................................... 7.00 6.00 .17
1994
First quarter........................................... $ 12.75 $ 10.00 $ .84
Second quarter.......................................... 11.75 9.50 .25
Third quarter........................................... 11.75 9.00 .29
Fourth quarter.......................................... 10.00 7.75 .17
</TABLE>
Such over-the-counter market quotations reflect interdealer prices without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
Tidelands must distribute to its unitholders all cash accumulated each
quarter, less an amount reserved for accrued liabilities and estimated future
expenses. Such distributions have been made since the third quarter of 1977 and
will continue so long as the income from oil and gas royalties exceeds
administrative costs.
The Securities and Exchange Commission has neither approved nor disapproved
Tidelands' Annual Report for its year ended December 31, 1995, nor has it passed
upon its accuracy or adequacy. While Tidelands' Form 10-K (excluding exhibits)
for the year ended December 31, 1995, is included in toto in Tidelands' 1995
Annual Report, a copy of such Form 10-K (without exhibits) is available without
charge to interested parties. There will be copying and mailing charges for
copies of any exhibits requested. Written requests should be directed to Ms.
Patricia Cox, NationsBank of Texas, N.A., P.O. Box 830241, Dallas, Texas
75283-0241.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income -- oil and gas royalties..... $ 978,172 $ 1,555,352 $ 4,022,181 $ 957,900 $ 1,016,147
Net income.......................... $ 965,004 $ 1,499,244 $ 3,924,078 $ 915,636 $ 990,037
Net income per unit................. $ .70 $ 1.08 $ 2.83 $ .66 $ .71
Distributions to unitholders........ $ 960,169 $ 2,142,298 $ 3,318,978 $ 905,177 $ 1,277,176
Distributions per unit.............. $ .69 $ 1.55 $ 2.39 $ .65 $ .92
Total assets........................ $ 1,905,164 $ 1,909,605 $ 3,928,046 $ 1,795,028 $ 2,393,322
</TABLE>
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources. Tidelands' only business purpose is to
collect revenues from its royalty-type interests in oil and gas leases, pay
administration expenses, and distribute the remaining revenues to its
unitholders. Tidelands can neither purchase additional properties nor dispose of
its existing properties. Because of these limitations Tidelands does not require
long term or short term capital. Furthermore, because all Tidelands' revenues
are invested in liquid funds pending distribution, Tidelands does not face
liquidity problems.
Results of Operations. Tidelands' income consists primarily of oil and gas
royalties and is based on the value at the wellhead of Tidelands' percentage
interest in oil and gas sold without reduction for production expenses. Value at
the wellhead for oil is the purchasers' posted price at its receiving point
onshore, less the cost of transportation from the offshore lease to the onshore
receiving point. Value at the wellhead for natural gas is based upon the
proceeds from sales under arms-length agreements. In the event an agreement is
not arms-length in nature, the value is based upon current market prices.
General
Distributions to unitholders amounted to $.69 per unit in 1995, a
significant decline from the $1.55 distributed in 1994. Distributions in 1993
and 1994 reflected royalties on four new gas wells, production from which began
in late 1992. However, only one of the four wells made a significant
contribution to Tidelands' 1995 income. The 1995 distribution was comparable to
the 1992 distribution and the fields that produced in 1992 still were producing
as of the end of 1995.
The average daily production of oil and gas (stated in mcf equivalents) to
Tidelands' interest in the first half of 1995 amounted to approximately 1,450
mcf per day and increased to approximately 1,800 mcf per day in the second half
of the year. Recent production indicates that the wells are presently producing
at an average rate of about 1,350 mcf per day.
Approximately 90% of Tidelands' revenue is from the sale of natural gas.
Prices for this commodity have declined since 1993. The average price for gas
realized in 1995 was $1.63 per mcf. However, cold weather in the winter months
of 1995 increased both demand and prices for gas. Tidelands received $2.16 for
gas sold in December 1995 from its interest in the West Cameron Block 165 Field.
No assurance can be given that gas prices will remain at this level or increase
further.
Three wells operated by Seneca Resources in the West Cameron Block 229
Field were depleted in 1995 and the lease was terminated. Income from these
three wells amounted to only $.06 per unit during 1995, but contributed
substantially more during 1993 and 1994.
Each of Tidelands' producing properties has paid out its $1,500,000
production payment and, therefore, Tidelands' present royalty interests in such
properties will not be further reduced.
General and administrative expenses have declined each year since 1993,
primarily due to the closing of an administrative office and to the reduction in
Tideland's revenues relative to the total revenues of Tidelands and Marine
Petroleum Trust and its subsidiary.
Tidelands' revenues are derived from the oil and gas production activities
of unrelated parties. Tidelands' revenues and distributions fluctuate from
period to period based upon factors beyond Tidelands' control, including without
limitation the number of leases bid on and obtained by parties subject to the
1951 Contract, the number of productive wells drilled on leases subject to
Tidelands' interest, the level of production over time from such wells and the
prices at which the oil and gas from such wells is sold. Tidelands 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;
7
<PAGE> 10
expiration or release of leases subject to Tidelands' interests; and the
discontinuation by parties subject to the 1951 Contract of their efforts to
obtain leases in the Royalty Area.
OIL AND GAS ROYALTIES -- 1995 AND 1994
Income from oil and gas royalties decreased 37% in 1995 as compared to
1994. Gas royalties decreased 40% and accounted for 90% of income for 1995.
These decreases primarily were caused by a decrease in the volume of gas
produced and a decrease in its average price. See "-- General." Average oil
prices increased 13% while average gas prices decreased 13%.
The following table presents comparative operating data which reflects
these underlying circumstances.
COMPARATIVE OPERATING DATA
<TABLE>
<CAPTION>
CHANGE FROM
1994 TO 1995
--------------------
1995 1994 AMOUNT PERCENT
-------- ---------- --------- -------
<S> <C> <C> <C> <C>
Income:
Oil royalties(1).............................. $ 98,423 $ 87,998 $ 10,425 12%
Gas royalties................................. 879,749 1,467,354 (587,605) (40)%
-------- ---------- ---------
$978,172 $1,555,352 $(577,180) (37)%
======== ========== =========
Net production quantities
Oil (bbls).................................... 7,804 7,899 (95) (1)%
Gas (mcf)..................................... 540,597 778,517 (237,920) (31)%
Average net prices
Oil(1)........................................ $ 12.61 $ 11.14 $ 1.47 13%
Gas........................................... $ 1.63 $ 1.88 $ (.25) (13)%
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
OIL AND GAS ROYALTIES -- 1994 AND 1993
Income from oil and gas royalties decreased 61% in 1994 as compared to
1993. Gas royalties accounted for 94% of income from royalties in 1994. The
price received for gas during 1994 decreased 5% from 1993 to $1.88 per mcf.
The following table presents comparative operating data which reflects
these underlying circumstances.
COMPARATIVE OPERATING DATA
<TABLE>
<CAPTION>
CHANGE FROM
1993 TO 1994
-----------------------
1994 1993 AMOUNT PERCENT
---------- ---------- ------------ -------
<S> <C> <C> <C> <C>
Income:
Oil royalties(1)........................... $ 87,998 $ 178,987 $ (90,989) (51)%
Gas royalties.............................. 1,467,354 3,843,193 (2,375,839) (62)%
---------- ---------- ------------
$1,555,352 $4,022,180 $ (2,466,828) (61)%
========== ========== ============
Net production quantities
Oil (bbls)................................. 7,899 12,831 (4,932) (38)%
Gas (mcf).................................. 778,517 1,938,104 (1,159,587) (60)%
Average net prices
Oil(1)..................................... $ 11.14 $ 13.95 $ (2.81) (20)%
Gas........................................ $ 1.88 $ 1.98 $ (.10) (5)%
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
8
<PAGE> 11
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Tidelands' consolidated financial statements listed in the following index,
together with the related notes and the report of KPMG Peat Marwick LLP,
independent certified public accountants, are presented on pages 11-17 hereof:
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
- -- Independent Auditors' Report............................................... 11
- -- Consolidated Balance Sheets as of December 31, 1995 and 1994............... 12
- -- Consolidated Statements of Income and Undistributed Income for the Three
Years Ended December 31, 1995............................................ 13
- -- Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1995........................................................ 14
- -- Notes to Consolidated Financial Statements................................. 15
</TABLE>
All schedules have been omitted because they are not required or because
the required information is shown in the consolidated financial statements or
notes thereto.
ACCOUNTING MATTERS
During 1995 and 1994 there were no disagreements by Tidelands with its
principal accountants on any matter of accounting principles or practices or
financial statement disclosure.
MANAGEMENT AND PRINCIPAL UNITHOLDERS
ADMINISTRATORS
Tidelands was created by a trust agreement effective June 1, 1954 and there
is no provision for the election of directors and officers. However, the
agreement does provide for the appointment of an individual trustee and a
corporate trustee.
NationsBank of Texas, N.A. is the corporate trustee and Mr. L. C. Paslay of
Lantana, Florida, is the individual trustee. Both have served continuously since
the organization of Tidelands.
Mr. Paslay is 88 years old and for at least the past five years has been
engaged in the management of his investments.
The trustees have entered into an arrangement with Marine Petroleum
Corporation (a wholly-owned subsidiary of Marine Petroleum Trust, parent of
Tidelands) to share certain administrative expenses. Mr. R. Ray Bell may be
considered a significant employee of Tidelands even though he is not directly
employed by Tidelands or Tidelands Corporation. Mr. Bell has been involved in
the administration of Tidelands since its inception. He is a certified public
accountant, 68 years old, and a graduate of Midwestern State University in
Wichita Falls, Texas, with a Bachelor of Science degree in business
administration and economics. Since July 1, 1977, Mr. Bell has been employed by
Marine Petroleum Corporation, a subsidiary of Marine Petroleum Trust, as vice
president and director. Mr. Bell will serve in such capacities until the next
annual meeting of directors of Marine Petroleum Corporation or until his
successor is elected and qualified.
MANAGEMENT COMPENSATION
During Tidelands' fiscal year ended December 31, 1995, Tidelands paid or
accrued fees of $10,927 to NationsBank of Texas, N.A., as corporate trustee. The
individual trustee served without compensation.
During Tidelands' fiscal year ended December 31, 1995, Tidelands paid
$30,921 to Marine Petroleum Corporation as its share of certain administrative
expenses. These expenses are shared in the ratio of each of the trusts' gross
receipts to the total gross receipts of both trusts.
9
<PAGE> 12
PRINCIPAL UNITHOLDERS
The following table sets forth the persons known to Tidelands who own
beneficially more than five percent of its outstanding units of beneficial
interest:
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED AS OF
NAME AND ADDRESS DECEMBER 31, PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER 1995 OF CLASS
-------------- -------------------- ------------- --------
<S> <C> <C> <C>
Units of Beneficial Interest.......................... Marine Petroleum Trust 452,366 32.6%
P.O. Box 830241
Dallas, Texas 75283-0241
</TABLE>
In addition, as of February 23, 1996, Cede & Company held of record 571,252
units of beneficial interest of Tidelands, or approximately 41% of the total
units outstanding.
The following table sets forth the number of units of beneficial interest
of Marine Petroleum Trust, a parent of Tidelands, beneficially owned by Mr. L.
C. Paslay, the individual trustee of Tidelands (Mr. Paslay did not directly own
any units in Tidelands as of December 31, 1995):
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
TITLE OF CLASS AS OF DECEMBER 31, 1995 CLASS
----------------------- ----------
<S> <C> <C>
Units of Beneficial Interest in Marine
Petroleum Trust..................................... 286,469 4.67%(1)
</TABLE>
- ---------------
(1) Represents percentage of units owned by Mr. Paslay in Marine Petroleum Trust
(14.32%) multiplied by the percentage of units in Tidelands owned by Marine
Petroleum Trust (32.6%), a "parent" of Tidelands.
MISCELLANEOUS
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Financial Statements -- See "Financial Statements and Supplementary Data"
above.
(b) Reports on Form 8-K -- None.
(c) Exhibits
(3) Indenture of Trust dated June 1, 1954, as amended (filed as Exhibit
(3) to the Annual Report on Form 10-K of Tidelands Royalty Trust "B"
for the year ended December 31, 1994, filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated herein by
reference).
(22) Subsidiaries.
(27) Financial Data Schedule.
10
<PAGE> 13
LOGO
INDEPENDENT AUDITORS' REPORT
The Trustees
Tidelands Royalty Trust "B":
We have audited the accompanying consolidated balance sheets of Tidelands
Royalty Trust "B" and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income and undistributed income and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tidelands
Royalty Trust "B" and subsidiary as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Dallas, Texas
February 23, 1996
11
LOGO
<PAGE> 14
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................... $1,706,767 $1,758,143
Oil and gas royalties receivable.............................. 198,395 151,460
---------- ----------
Total current assets................................ 1,905,162 1,909,603
Oil, gas and other mineral properties........................... 2 2
---------- ----------
$1,905,164 $1,909,605
========== ==========
LIABILITIES AND TRUST EQUITY
Current liabilities:
Accounts payable (note 3)..................................... $ 984,941 $ 987,325
Income distributable to unitholders........................... 231,749 235,022
Federal income taxes payable.................................. 374 3,993
---------- ----------
Total current liabilities........................... 1,217,064 1,226,340
---------- ----------
Trust equity:
Corpus -- authorized 1,386,525 units of beneficial interest,
issued 1,386,375 units at nominal value.................... 2 2
Undistributed income (note 2)................................. 688,098 683,263
---------- ----------
Total trust equity.................................. 688,100 683,265
---------- ----------
$1,905,164 $1,909,605
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 15
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Income:
Oil and gas royalties................................ $ 978,172 $1,555,352 $4,022,181
Interest and other................................... 79,451 55,572 39,047
---------- ---------- ----------
Total income............................... 1,057,623 1,610,924 4,061,228
---------- ---------- ----------
Expenses:
Production and other taxes........................... 620 620 620
General and administrative........................... 75,347 100,460 132,477
---------- ---------- ----------
Total expenses............................. 75,967 101,080 133,097
---------- ---------- ----------
Income before Federal income taxes......... 981,656 1,509,844 3,928,131
Federal income taxes of subsidiary..................... 16,652 10,600 4,053
---------- ---------- ----------
Net income................................. 965,004 1,499,244 3,924,078
Undistributed income at beginning of year.............. 683,263 1,326,317 721,217
---------- ---------- ----------
1,648,267 2,825,561 4,645,295
Distributions to unitholders........................... 960,169 2,142,298 3,318,978
---------- ---------- ----------
Undistributed income at end of year.................... $ 688,098 683,263 $1,326,317
========== ========== ==========
Net income per unit.................................... $.70 $1.08 $2.83
Distributions per unit................................. $.69 $1.55 $2.39
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 16
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 965,004 $ 1,499,244 $ 3,924,078
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in assets and liabilities:
Accounts receivable........................... (46,935) 3,631 154,378
Federal income taxes.......................... (3,619) 18,593 (10,947)
Accounts payable.............................. (2,384) (168,746) 319,090
---------- ----------- -----------
Net cash provided by operating
activities............................... 912,066 1,352,722 4,386,599
---------- ----------- -----------
Cash flows from financing activities -- distributions
to unitholders..................................... (963,442) (3,352,932) (2,110,150)
---------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.............................. (51,376) (2,000,210) 2,276,449
Cash and cash equivalents at beginning of year....... 1,758,143 3,758,353 1,481,904
---------- ----------- -----------
Cash and cash equivalents at end of year............. $1,706,767 $ 1,758,143 $ 3,758,353
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 17
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
(a) General
The Trust was established on June 1, 1954 with a transfer of contract
rights to certain properties to the Trust in exchange for units of beneficial
interest. The contract rights enable the Trust to receive an interest in any
oil, gas or other mineral leases obtained by Gulf Oil Corporation, now Chevron
U.S.A., Inc. (Chevron) which is a subsidiary of Chevron Corporation, and its
assignees in a designated area of the Gulf of Mexico during a 50-year period
beginning April 30, 1951. Royalty revenue received from Chevron accounted for
approximately 19%, 24%, and 54% of total royalty revenue for the years ended
December 31, 1995, 1994 and 1993, respectively. Royalty revenue received from
Pennzoil Exploration and Production Company totaled approximately 63% and 59%
for the years ended December 31, 1995 and 1994, respectively.
The Trust is required under its indenture to distribute all income, after
paying its liabilities and obligations, to the unitholders quarterly. The Trust
cannot invest any of the money of the Trust for any purpose and cannot engage in
a trade or business.
A Louisiana trust can only exist for a short period of time; therefore the
unitholders assigned their off-shore Louisiana contract rights to Tidelands
Royalty "B" Corporation, a wholly owned subsidiary of the Trust, reserving a 95%
net profits interest to themselves. The net profits interest contract was
transferred to the Trust along with the other properties. The Trust is
authorized to pay expenses of the Corporation should it be necessary.
The Trust has entered into an arrangement with Marine Petroleum Corporation
(a wholly-owned subsidiary of Marine Petroleum Trust, an affiliate of
Tidelands), to share certain administrative expenses. The sole purpose of this
operation is to assist the trustees in the administration of the trusts.
At December 31, 1995 and 1994, Marine Petroleum Trust owned 32.6% of the
Trust's outstanding units of beneficial interest.
(b) Principles of Consolidation
The consolidated financial statements include the Trust and its
wholly-owned subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation.
(c) Oil, Gas and Other Mineral Properties
At the time the Trust was established, no determinable market value was
available for the assets transferred to the Trust; consequently, nominal values
were assigned. Accordingly, no allowance for depletion has been computed.
The Trust's revenues are derived from production payments and overriding
royalty interests related to properties located in the Gulf of Mexico.
In 1993, Tidelands began receiving royalties on High Island Block 128 Well
Number 1. The well was completed in October 1989 and was operated by Santa Fe
Minerals until October 1990 when Chevron took over as operator. During 1993,
Chevron determined that the Trust was entitled to an interest in the well.
Chevron made payments in 1993 on production dating from October 1989 to December
1992 totaling approximately $2,200,000, including approximately $1,400,000,
which was recorded in the fourth quarter of 1993.
Net revenues from oil and gas royalties related to proved developed oil and
gas reserves were $978,172, $1,555,352, and $4,022,181 in 1995, 1994 and 1993,
respectively.
15
<PAGE> 18
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Federal Income Taxes
No provision has been made for Federal income taxes on the Trust's income
since such taxes are the liability of the unitholders. Federal income taxes have
been provided on the income of the subsidiary corporation, excluding the 95% to
be distributed to the Trust and deducting statutory depletion.
(e) Credit Risk Concentration and Cash Equivalents
Financial instruments which potentially subject the Trust and its
wholly-owned subsidiary to concentrations of credit risk are primarily
investments in cash equivalents and unsecured oil and gas royalties receivable.
The Trust and its wholly-owned subsidiary place their cash investments with
financial institutions that management considers creditworthy and limit the
amount of credit exposure from any one financial institution. Royalties
receivable are from large creditworthy companies and the Trust has historically
not encountered collection problems. The estimated fair values of cash
equivalents and oil and gas royalties receivable approximate the carrying values
due to the short term nature of these financial instruments.
Cash equivalents of $1,339,089 and $1,435,353 at December 31, 1995 and
1994, respectively, consist of cash held in money market and overnight
government backed securities accounts. For purposes of the statements of cash
flows, the Trust considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(f) Statements of Cash Flows
The Trust paid $20,271 in Federal income taxes in 1995. The Trust received
a $7,993 refund of Federal income taxes in 1994. During 1993, Federal income tax
payments amounted to $15,000. No payments of interest were made in 1995, 1994
and 1993.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) UNDISTRIBUTED INCOME
Undistributed income includes $403,506 and $331,402 applicable to the
subsidiary corporation at December 31, 1995 and 1994, respectively.
(3) OVERPAID ROYALTIES
The Trust has recorded estimated Royalty overpayments which may have been
received by the Trust in various years from 1988 through 1993. A potential
liability for the estimated amount of the overpayments is reflected in accounts
payable in the accompanying consolidated balance sheets.
(4) SUPPLEMENTAL INFORMATION RELATING TO OIL AND GAS RESERVES (UNAUDITED)
Oil and gas reserve information relating to the Trust's royalty interests
is not presented because such information is not available to the Trust. The
Trust's share of oil and gas produced for its royalty interests was as follows:
oil (barrels) -- 7,804 in 1995, 7,899 in 1994 and 12,831 in 1993 and gas
(mcf) -- 540,597 in 1995, 778,517 in 1994 and 1,938,104 in 1993.
16
<PAGE> 19
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly financial information for the years ended December
31, 1995 and 1994 is unaudited; however, in the opinion of management, all
adjustments necessary to a fair statement of the results of operations for the
interim periods have been included.
<TABLE>
<CAPTION>
OIL AND GAS TOTAL NET NET INCOME
ROYALTIES EXPENSES INCOME PER UNIT
----------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Quarter ended:
March 31, 1995.................... $ 261,326 $ 22,421 $ 254,268 $ .18
June 30, 1995..................... 156,819 27,977 146,070 .11
September 30, 1995................ 278,542 9,478 283,883 .21
December 31, 1995................. 281,485 16,091 280,783 .20
---------- -------- ---------- -----
$ 978,172 $ 75,967 $ 965,004 $ .70
========== ======== ========== =====
Quarter ended:
March 31, 1994.................... $ 490,114 $ 30,110 $ 467,995 $ .34
June 30, 1994..................... 502,875 32,451 479,039 .34
September 30, 1994................ 290,602 18,531 284,701 .21
December 31, 1994................. 271,761 19,988 267,509 .19
---------- -------- ---------- -----
$1,555,352 $101,080 $1,499,244 $ 1.08
========== ======== ========== =====
</TABLE>
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed by the undersigned thereunto duly authorized.
Tidelands Royalty Trust "B"
(Registrant)
By: NationsBank of Texas, N.A.
(in its capacity as Corporate Trustee
of Tidelands Royalty Trust "B"
and not in its individual capacity
or otherwise)
Date: March 29, 1996 By: /s/ PATRICIA COX
--------------------------------------
Patricia Cox
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITIES DATE
---- ---------- ----
<C> <S> <C>
NationsBank of Texas, N.A. Corporate Trustee March 29, 1996
By: /s/ PATRICIA COX
------------------------------------------
Patricia Cox
Vice President
/s/ L. C. PASLAY Individual Trustee March 29, 1996
------------------------------------------
L. C. Paslay
/s/ R. RAY BELL Principal Accounting Officer March 29, 1996
------------------------------------------
R. Ray Bell
</TABLE>
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
(3) -- Indenture of Trust dated June 1, 1954, as amended (filed as Exhibit
(3) to the Annual Report on Form 10-K of Tidelands Royalty Trust "B"
for the year ended December 31, 1994, filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated herein by
reference).
(22) -- Subsidiaries.
27 -- Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF TIDELAND ROYALTY TRUST "B"
TIDELANDS ROYALTY "B" CORPORATION
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,706,767
<SECURITIES> 0
<RECEIVABLES> 198,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,905,162
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,905,164
<CURRENT-LIABILITIES> 1,217,064
<BONDS> 0
<COMMON> 2
0
0
<OTHER-SE> 688,098
<TOTAL-LIABILITY-AND-EQUITY> 1,905,164
<SALES> 978,172
<TOTAL-REVENUES> 1,057,623
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 75,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 981,656
<INCOME-TAX> 16,652
<INCOME-CONTINUING> 965,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 965,004
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
