<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 MARCH 31, 1999
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, N.A. 75283-0241
DBA BANK OF AMERICA, N.A. (Zip Code)
P.O. BOX 830241, DALLAS, TEXAS
(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)
---------------------
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, 1999
---------------------------- --------------------------------------
<S> <C>
UNITS OF BENEFICIAL INTEREST 1,386,375
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TIDELANDS ROYALTY TRUST "B"
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).................... 2
Condensed Consolidated Balance Sheets March 31, 1999 and
December 31, 1998......................................... 2
Condensed Consolidated Statements of Income and
Undistributed Income Three Months Ended March 31, 1999 and
1998...................................................... 3
Condensed Consolidated Statements of Cash Flows Three Months
Ended March 31, 1999 and 1998............................. 4
Notes to Condensed Consolidated Financial Statements........ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK...................................................... 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 8
Signatures.................................................. 9
Exhibit Index............................................... 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $1,708,438 $1,525,131
Oil and gas royalties receivable.......................... 152,969 113,214
Federal income taxes receivable........................... 4,478 7,578
---------- ----------
Total current assets.............................. $1,865,885 $1,645,923
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$1,865,887 $1,645,925
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable.......................................... $ 611,656 $ 645,567
Income distributable to unitholders....................... 233,868 107,334
---------- ----------
Total current liabilities......................... $ 845,502 $ 752,901
---------- ----------
Trust Equity:
Corpus -- authorized 1,386,525 units of beneficial
interest, issued 1,386,375 units at nominal value...... 2 2
Undistributed income...................................... 1,020,383 893,022
---------- ----------
Total trust equity................................ 1,020,385 893,024
---------- ----------
$1,865,887 $1,645,925
========== ==========
</TABLE>
2
<PAGE> 4
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Income:
Oil and gas royalties..................................... $ 372,190 $ 467,245
Interest and other........................................ 16,074 19,685
---------- ----------
Total income...................................... 388,264 486,930
---------- ----------
Expenses:
Production and other taxes................................ 620 620
General and administrative................................ 23,337 21,760
---------- ----------
Total expenses.................................... 23,957 22,380
---------- ----------
Income before Federal income taxes........................ 364,307 464,550
Federal income taxes of subsidiary........................ 3,100 4,000
---------- ----------
Net income........................................ 361,207 460,550
Undistributed income at beginning of period................. 893,022 803,971
---------- ----------
1,254,229 1,264,521
Distributions to unitholders................................ 233,846 267,817
---------- ----------
Undistributed income at end of period....................... $1,020,383 $ 996,704
========== ==========
Net income per unit......................................... $ .26 $ .33
========== ==========
Distributions per unit...................................... $ .17 $ .19
========== ==========
</TABLE>
3
<PAGE> 5
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 361,207 $ 460,930
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in assets and liabilities:
Oil and gas royalties receivable..................... (39,755) (44,202)
Federal income taxes receivable...................... 3,100 4,000
Accounts payable..................................... (33,911) (59,270)
---------- ----------
Net cash provided by operating activities......... 290,641 361,458
---------- ----------
Cash flows from financing activities -- distributions to
unitholders............................................... 107,334 (629,988)
Net increase (decrease) in cash and cash equivalents...... 183,307 (268,530)
Cash and cash equivalents at beginning of period............ 1,525,131 2,257,909
---------- ----------
Cash and cash equivalents at end of period.................. $1,708,438 $1,989,379
========== ==========
</TABLE>
4
<PAGE> 6
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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, 1998. 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, 1999 consisted of $396,166 applicable
to the Trust and $624,217 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 $253,610 have been provided to cover refunds that may
be required upon redetermination of gas prices for royalty payments in prior
periods and $346,268 has been reserved for possible overpayments received on
production payments, which amounts have been substantially supplied by Tidelands
Royalty B Corporation. During the quarter ended March 31, 1999 it was determined
that $37,792 was no longer required to be reserved for possible royalty
overpayments. Accordingly accounts payable was reduced and net income increased
by that amount.
ITEM 2. 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 three months ended March 31, 1999 amounted to $.26 per
unit, a decrease of $.07 over the $.33 realized in the comparable period a year
ago. Cash distributions to unitholders amounted to
5
<PAGE> 7
$.17 per unit in the current three month period, a decrease of $.02 from the
$.19 per unit distributed in the comparable period a year ago. Net income
decreased approximately 22% in the current quarter over that realized in the
comparable quarter a year ago.
The Trust realizes most of its income from the sale of natural gas, which
sales accounted for approximately 95% of income in the current three month
period unchanged from the comparable period last year.
Distributions fluctuate from quarter to quarter due to changes in oil and
gas prices and production quantities. Net income is determined by the revenue
from oil and gas produced and sold during the accounting period. Distributions,
however, are determined by the cash available on the determination date.
The following table presents the net production quantities of oil and gas
and the net income and distributions per unit for the last five quarters.
<TABLE>
<CAPTION>
PRODUCTION
----------------------- NET CASH
QUARTER OIL (bbls) GAS (mcf) INCOME DISTRIBUTION
------- ---------- --------- ------ ------------
<S> <C> <C> <C> <C>
December 31, 1997................................. 1,877 155,164 $.29 $.45
March 31, 1998.................................... 2,287 138,667 .33 .19
June 30, 1998..................................... 2,172 69,982 .17 .24
September 30, 1998................................ 2,006 54,454 .13 .29
December 31, 1998................................. 3,470 142,233 .22 .08
March 31, 1999.................................... 2,573 171,015 .26 .17
</TABLE>
No wells were drilled during the current quarter. However, during the past
two years working interest owners have drilled 5 gas wells on 3 leases subject
to the Trust's overriding royalty 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.
Important aspects of the Trust's operations are conducted by third parties.
These include the production and sale of oil and gas and the calculation and
payment of royalty payments to the Trust, which are conducted
6
<PAGE> 8
by oil and gas companies that lease tracts subject to the Trust's interests.
Similarly, the Trust's distributions are processed and paid by The Bank of New
York as the agent for the trustee of the Trust. Any disruption of the Trust's
operations that results from Year 2000 problems of these third parties could
have a material adverse effect on the Trust. The Trust does not have access to
information that would permit the Trust to determine the status of these third
parties' efforts to analyze and address Year 2000 issues. The Trust intends to
monitor these parties' public announcements and disclosure regarding Year 2000
issues, and to seek direct assurances where appropriate, in an effort to ensure
that these parties address Year 2000 issues that could adversely affect the
Trust.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1999
During the quarters ended March 31, 1999 and March 31, 1998, Tidelands
Royalty B Corporation determined that $37,792 and $72,637 respectively, was no
longer required to be reserved for possible royalty overpayments. Accordingly
accounts payable was reduced and net income increased by those amounts.
Net income for the current quarter amounted to $361,207 (including the
$37,792 release of the accounts payable reserve), down approximately 22% from
the $460,550 (including the $72,637 release of the accounts payable reserve),
realized in the comparable quarter a year ago.
Revenue from oil royalties decreased 20% to $17,202 in the current quarter
from $21,622 realized in the comparable period a year ago. As shown in the table
below, the increase in oil production over the comparable period a year ago was
offset by a decline in oil prices realized.
Revenue from gas royalties decreased 20% to $354,988 in the current quarter
from $445,623 in the comparable period a year ago. The gas revenue figures
include the additional revenue from the reduction of the accounts payable
reserve as discussed above. As shown in the table below, while gas production
increased over the comparable period a year ago, it was offset by a decline in
natural gas prices.
The quantities of oil and gas sold and the average prices realized from
current operations without the revenues realized from the reduction of the
accounts payable reserve as described above for the three months ended March 31,
1999, and those realized in the comparable 1998 quarter, are presented in the
following table:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
OIL
Barrels sold.............................................. 2,573 2,287
Average Price............................................. $6.69 $9.45
NATURAL GAS
Mcf sold.................................................. 171,015 138,667
Average price............................................. $1.85 $2.69
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
7
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
27 -- Financial Data Schedule
</TABLE>
(b) Current Reports on Form 8-K:
None
8
<PAGE> 10
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, N.A. DBA Bank of America, N.A., Trustee
May 13, 1999 By: /s/ JANE J. SHEA
-------------------------------------------------
Jane J. Shea
Vice President
May 13, 1999 By: /s/ R. RAY BELL
-------------------------------------------------
R. Ray Bell
Principal Accounting Officer
</TABLE>
9
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
<PAGE> 12
TIDELANDS ROYALTY TRUST "B"
C/O NATIONSBANK, N.A.
P.O. BOX 830241
DALLAS, TEXAS 75283-0241
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,708,438
<SECURITIES> 0
<RECEIVABLES> 152,969
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,865,885
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,865,887
<CURRENT-LIABILITIES> 845,502
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 1,020,383
<TOTAL-LIABILITY-AND-EQUITY> 1,865,887
<SALES> 372,190
<TOTAL-REVENUES> 388,264
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 364,307
<INCOME-TAX> 3,100
<INCOME-CONTINUING> 361,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 361,207
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
