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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 MARCH 31, 1998
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 March 31, 1998
---------------------------- --------------------------------------
<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
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
---------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $1,989,379 $2,257,909
Oil and gas royalties receivable.......................... 203,939 159,737
Federal income taxes receivable........................... -- 3,578
---------- ----------
Total current assets.............................. $2,193,318 $2,421,224
---------- ----------
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$2,193,320 $2,421,226
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable.......................................... $ 928,371 $ 987,641
Income distributable to unitholders....................... 267,821 629,612
Federal income tax payable................................ 422 --
---------- ----------
Total current liabilities......................... $1,196,614 $1,617,253
---------- ----------
Trust Equity:
Corpus -- authorized 1,386,525 units of beneficial
interest, issued 1,386,375 units at nominal value...... $ 2 $ 2
Undistributed income...................................... 996,704 803,971
---------- ----------
Total trust equity................................ 996,706 803,973
---------- ----------
$2,193,320 $2,421,226
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</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
--------------------
1998 1997
-------- --------
<S> <C> <C>
Income:
Oil and gas royalties..................................... $467,245 $232,313
Interest and other........................................ 19,685 18,461
-------- --------
$486,930 $250,774
-------- --------
Expenses:
Production and other taxes................................ 620 620
General and administrative................................ 21,760 19,293
-------- --------
Total expenses.................................... 22,380 19,913
-------- --------
Income before Federal income taxes........................ 464,550 230,861
Federal income taxes of subsidiary........................ 4,000 3,700
-------- --------
Net income........................................ $460,550 $227,161
======== ========
Net income per unit......................................... $0.33 $0.16
======== ========
Distributions per unit...................................... $0.19 $0.17
======== ========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 460,930 $ 227,161
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in assets and liabilities:
Accounts receivable.................................. (44,202) 56,757
Federal income taxes................................. 4,000 3,700
Accounts payable..................................... (59,270) 1,448
---------- ----------
Net cash provided by operating activities......... 361,458 289,066
---------- ----------
Cash flows from financing activities -- distributions to
unitholders............................................... (629,988) (226,914)
Net increase (decrease) in cash and cash equivalents...... (268,530) 62,152
Cash and cash equivalents at beginning of period............ 2,257,909 1,763,020
---------- ----------
Cash and cash equivalents at end of period.................. $1,989,379 $1,825,172
========== ==========
</TABLE>
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1997. 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 March 31, 1998 consisted of $435,554 applicable
to the Trust and $561,150 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 $484,305 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. During the most recent quarter, Tidelands Royalty B
Corporation determined that $72,637 no longer was required to be retained in the
account payable for possible royalty overpayments. Accordingly, during the most
recent quarter, the account payable was reduced, and net income was increased,
by $72,637.
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.
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GENERAL
Net income increased 101% in the current quarter over the amount realized
in the comparable quarter a year ago. Net income per unit amounted to $.33 in
the quarter ended March 31, 1998 and was $.16 in the quarter ended March 31,
1997.
Distributions fluctuate from quarter to quarter due to changes in prices,
changes in production quantities and timing differences. Net income is
determined by the revenue from oil and gas produced and sold during the
accounting period while distributions are determined by the cash available on
the determination date. The amount of each distribution is determined ten days
prior to the applicable record date.
The following table presents the net income and distributions per unit for
the last five quarters.
<TABLE>
<CAPTION>
QUARTER NET INCOME DISTRIBUTION
- ------- ---------- ------------
<S> <C> <C>
March 31, 1997.............................................. $.16 $.17
June 30, 1997............................................... .21 .13
September 30, 1997.......................................... .26 .13
December 31, 1997........................................... .29 .45
March 31, 1998.............................................. .33 .19
</TABLE>
There were no drilling or workover permits reported for the royalty
properties during the current quarter.
The posted price for oil delivered onshore in Louisiana reached a low of
$13.85 in March and increased slightly to $14.16 in April. Oil prices have
declined approximately 30% during the past twelve months. The spot-price
indicators for gas delivered to the Henry Hub were $2.26 per Mmbtu in March and
have been steady at approximately that rate for April and May.
The Trust's revenues are derived from the oil and gas production 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 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 to production facilities, 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 contract dated April 30, 1951 between
the Trust's predecessors and Gulf Oil Corporation of their efforts to obtain
leases in the area that is subject to the Trust's interests.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1998
Net income, before the adjustment described in the next paragraph,
increased approximately 69% for the current quarter over the amount realized a
year ago. Gas royalties from the Galveston 303 Field in the current
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quarter increased approximately 15 times over the amount realized a year ago,
while gas royalties from the West Cameron Block 165 Field declined approximately
81% from the amount realized in 1997.
During the quarter ended March 31, 1998, Tidelands Royalty B Corporation
determined that $72,637 no longer was required to be retained in the account
payable for possible royalty overpayments. Accordingly, during such quarter, the
account payable was reduced, and net income was increased, by $72,637.
The average price for natural gas increased $.56 per Mcf to $3.21 per Mcf,
a 21% increase in the current quarter from a year ago, but oil prices declined.
The average price received for oil in the current quarter was $9.45 per barrel,
down $7.48 from the $16.93 received a year ago. These prices reflect the value
at the well. The market price for oil sold from the Sabine Pass Block 13 Field
delivered onshore was $16.02 in January 1998 and was $13.77 in March 1998.
The quantities of oil and gas sold and the average prices for oil and gas
for the three month periods ended March 31, 1998 and 1997 are presented in the
following table:
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
OIL
Barrels sold.............................................. 2,287 1,576
Average price............................................. $ 9.45 $ 16.93
NATURAL GAS
Mcf sold.................................................. 138,667 77,609
Average price............................................. $ 3.21 $ 2.65
</TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Chas. G. McBurney, the individual trustee, has resigned for personal
reasons. Although the instruments pursuant to which the Trust were created
provide for an individual trustee, none of the individuals identified therein as
possible individual trustees currently is available to serve as the individual
trustee. Management of the Trust believes that the duties of the individual
trustee can be administered by R. Ray Bell, the principal accounting officer of
the Trust. Management of the Trust also believes that the Trust likely would
incur substantial expenses in recruiting and electing a new individual trustee.
The indenture (the "Indenture") pursuant to which the Trust was created will
expire on April 30, 2001 unless extended by vote of the holders of a majority of
the outstanding units of beneficial interest in the Trust. In order to reduce
the expenses to be incurred in electing a new individual trustee, the Trust may
elect to submit such matter to a vote of the holders of units of beneficial
interest in conjunction with the submission to such holders of the question
whether to extend the term of the Indenture. Management of the Trust has not
determined when, or if, either such matter will be presented to the holders of
units of beneficial interest.
There were no other 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.
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<S> <C>
TIDELANDS ROYALTY TRUST "B"
NationsBank of Texas, N.A., Trustee
May 12, 1998 By: /s/ JANE J. SHEA
------------------------------------------------
Jane J. Shea
Vice President
May 12, 1998 /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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-30-1998
<CASH> 1,989,379
<SECURITIES> 0
<RECEIVABLES> 203,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,193,318
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,193,320
<CURRENT-LIABILITIES> 1,196,614
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 996,704
<TOTAL-LIABILITY-AND-EQUITY> 2,193,320
<SALES> 467,245
<TOTAL-REVENUES> 486,930
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 464,550
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 460,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 460,550
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
