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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
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, 1997
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, 1997
---------------------------- --------------------------------------
<C> <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, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
<CAPTION>
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $1,670,785 $1,763,020
Oil and gas royalties receivable.......................... 509,666 175,012
Federal income taxes receivable........................... 4,678 7,226
---------- ----------
Total current assets.............................. $2,185,129 $1,945,258
---------- ----------
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$2,185,131 $1,945,260
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable.......................................... $ 990,358 $ 983,433
Income distributable to unitholders....................... 121,191 226,916
---------- ----------
Total current liabilities......................... $1,111,549 $1,210,349
---------- ----------
Trust Equity:
Corpus -- authorized 1,386,525 units of beneficial
interest, issued 1,386,375 units at nominal value...... $ 2 $ 2
Undistributed income...................................... 1,073,580 734,909
---------- ----------
Total trust equity................................ 1,073,582 734,911
---------- ----------
$2,185,131 $1,945,260
========== ==========
</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, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Oil and gas royalties......................... $373,876 $217,433 $897,884 $855,740
Interest and other............................ 19,867 18,535 58,122 54,014
-------- -------- -------- --------
$393,743 $235,968 $956,006 $909,754
-------- -------- -------- --------
Expenses:
Production and other taxes.................... 0 620 620
General and administrative.................... 32,033 12,909 69,502 62,982
-------- -------- -------- --------
Total expenses........................ 32,033 12,909 70,122 63,602
-------- -------- -------- --------
Income before Federal income taxes............ 361,710 223,059 885,884 846,152
Federal income taxes of subsidiary............ 3,300 4,200 10,900 12,800
-------- -------- -------- --------
Net income............................ $358,410 $218,859 $874,984 $833,352
======== ======== ======== ========
Net income per unit............................. $0.26 $0.16 $0.63 $0.60
======== ======== ======== ========
Distributions per unit.......................... $0.13 $0.20 $0.39 $0.58
======== ======== ======== ========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 874,984 $ 833,352
Adjustments to reconcile net income to net cash provided
by operating activities:
Changes in assets and liabilities:
Accounts receivable.................................. (334,654) 39,861
Federal income taxes................................. 2,548 (7,375)
Accounts payable..................................... 6,925 (1,167)
---------- ----------
Net cash provided by operating activities......... 549,803 864,671
---------- ----------
Cash flows from financing activities -- distributions to
unitholders............................................... (642,038) (756,201)
Net increase (decrease) in cash and cash equivalents...... (92,235) 108,470
Cash and cash equivalents at beginning of period............ 1,763,020 1,706,767
---------- ----------
Cash and cash equivalents at end of period.................. $1,670,785 $1,815,237
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1996. 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, 1997 consisted of $546,577
applicable to the Trust and $527,003 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, 1997 amounted to $.63
per unit, an increase of $.03 over the $.60 realized in the comparable period a
year ago. Cash distributions to unitholders amounted to $.38 per unit in the
current nine-month period, down $.19 from the $.58 per unit distributed in the
comparable period a year ago. Approximately 70% of the Trust's net income for
the current quarter resulted from royalties
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attributable to wells located on Galveston Block 303. On the date on which the
distributions for the current quarter were determined, the Trust had not
received payments in respect of such royalties. The Trust understands that this
payment disruption was temporary and the Trust now is receiving payments on an
orderly basis from production on Galveston Block 303.
The Trust realizes most of its income from the sale of natural gas, which
sales accounted for approximately 87% of income in the current nine month period
as compared to approximately 90% in the comparable period last year. Revenue
from the sale of oil was responsible for approximately 13% of the Trust's income
in the current nine month period, as compared to approximately 10% in the
comparable period last year.
There were no drilling operations during the current quarter on leases
subject to the Trust's interest.
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, 1997
Income from oil and gas royalties increased approximately 62% in the
current quarter as compared to the comparable quarter last year. Natural gas
production increased approximately 68% from a year ago and oil production
increased approximately 92%. Production of oil from the Sabine Pass Block 13
field accounted for most of the increased oil production. The average price
received for natural gas in the current quarter increased approximately 2% to
$2.02 from $1.98 realized last year. The average price for oil decreased
approximately 5% to $13.10 from $13.79 realized last year. Production from older
gas wells that are subject to the Trust's interest continued to decline in the
current quarter.
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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, 1997, and those recorded for the
comparable 1996 period, are presented in the following table:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
OIL
Barrels sold.............................................. 3,608 1,875
Average price............................................. $ 13.10 $ 13.79
NATURAL GAS
mcf sold.................................................. 161,936 96,611
Average price............................................. $ 2.02 $ 1.98
</TABLE>
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1997
Income from oil and gas royalties increased approximately 5% in the current
nine month period as compared to the comparable period last year. The average
price for natural gas decreased approximately 1% to $2.25 from $2.27 realized
last year. The average price for oil decreased approximately 2% to $14.14 from
$14.44 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, 1997, and those recorded for the
comparable 1996 period, are presented in the following table:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
OIL
Barrels sold.............................................. 8,471 6,176
Average price............................................. $ 14.14 $ 14.44
NATURAL GAS
mcf sold.................................................. 346,480 337,134
Average price............................................. $ 2.25 $ 2.27
</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.
<TABLE>
<S> <C>
TIDELANDS ROYALTY TRUST "B"
NationsBank of Texas, N.A., Trustee
November 13, 1997 By: /s/ PATRICIA COX
------------------------------------------------
Patricia Cox
Vice President
November 13, 1997 /s/ R. RAY BELL
------------------------------------------------
R. Ray Bell
Principal Accounting Officer
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,670,785
<SECURITIES> 0
<RECEIVABLES> 509,666
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,185,129
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,185,131
<CURRENT-LIABILITIES> 1,111,549
<BONDS> 0
<COMMON> 2
0
0
<OTHER-SE> 1,073,580
<TOTAL-LIABILITY-AND-EQUITY> 2,185,131
<SALES> 897,884
<TOTAL-REVENUES> 956,006
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 70,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 885,884
<INCOME-TAX> 10,900
<INCOME-CONTINUING> 874,984
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 874,984
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
