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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, 2000
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.)
BANK OF AMERICA, 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, 2000
---------------------------- --------------------------------------
<S> <C>
UNITS OF BENEFICIAL INTEREST 1,386,375
</TABLE>
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TIDELANDS ROYALTY TRUST "B"
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).................... 2
Condensed Consolidated Balance Sheets March 31, 2000 and
December 31, 1999......................................... 2
Condensed Consolidated Statements of Income and
Undistributed Income -- Three Months Ended March 31, 2000
and 1999.................................................. 3
Condensed Consolidated Statements of Cash Flows -- Three
Months Ended March 31, 2000 and 1999...................... 4
Notes to Condensed Consolidated Financial Statements........ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................... 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 9
Signatures.................................................. 10
Exhibit Index............................................... 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $1,419,528 $1,464,127
Oil and gas royalties receivable.......................... 87,464 96,090
---------- ----------
Total current assets.............................. 1,506,992 1,560,217
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$1,506,994 $1,560,219
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable.......................................... $ 350,506 $ 385,015
Income distributable to unitholders....................... 183,700 239,477
Federal income taxes payable.............................. 4,211 211
---------- ----------
Total current liabilities......................... $ 538,417 $ 624,703
---------- ----------
Trust Equity:
Corpus -- authorized 1,386,525 units of beneficial
interest, issued 1,386,375 units at nominal value...... 2 2
Undistributed income...................................... 968,575 935,514
---------- ----------
Total trust equity................................ 968,577 935,516
---------- ----------
$1,506,994 $1,560,219
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Income:
Oil and gas royalties..................................... $ 228,498 $ 372,190
Interest and other........................................ 16,165 16,074
---------- ----------
Total income...................................... 244,663 388,264
---------- ----------
Expenses:
General and administrative................................ 23,905 23,957
---------- ----------
Income before Federal income taxes................ 220,758 364,307
Federal income taxes of subsidiary.......................... 4,000 3,100
---------- ----------
Net income........................................ 216,758 361,207
Undistributed income at beginning of period................. 935,514 893,022
---------- ----------
1,152,272 1,254,229
Distributions to unitholders................................ 183,697 233,846
---------- ----------
Undistributed income at end of period....................... $ 968,575 $1,020,383
========== ==========
Net income per unit......................................... $ 0.16 $ 0.26
========== ==========
Distributions per unit...................................... $ 0.13 $ 0.17
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 216,758 $ 361,207
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in assets and liabilities:
Oil and gas royalties receivable..................... 8,626 (39,755)
Federal income taxes payable......................... 4,000 3,100
Accounts payable..................................... (34,509) (33,911)
---------- ----------
Net cash provided by operating activities......... 194,875 290,641
---------- ----------
Cash flows from financing activities -- distributions to
unitholders............................................... (239,474) (107,334)
Net increase (decrease) in cash and cash equivalents...... (44,599) 183,307
Cash and cash equivalents at beginning of period............ 1,464,127 1,525,131
---------- ----------
Cash and cash equivalents at end of period.................. $1,419,528 $1,708,438
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(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 on Form 10-K for the
fiscal year ended December 31, 1999. 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. Operating results for the three months ended March 31, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
UNDISTRIBUTED INCOME
Undistributed income as of March 31, 2000 consisted of $273,681 applicable
to the Trust and $694,894 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
The Trust's subsidiary, Tidelands Royalty B Corporation, has a remaining
account payable of $346,268 at March 31, 2000 to cover refunds that may be
required for possible overpayments received on production payments. During the
quarter ended March 31, 2000 it was determined that $32,500 was no longer
required to be reserved for possible royalty overpayments. Accordingly accounts
payable was reduced and oil and gas royalties were increased by that amount.
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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
Oil and gas royalties were down 39% in the current quarter as compared to
the comparable quarter a year ago. Gas revenue declined 70% while there was a
602% increase in oil revenue. Despite the 602% increase in oil revenue, the
increase did not offset the 70% decline in gas revenue.
The increase in oil royalties was due to condensate production from a well
in the West Cameron Block 165 Field and to a significant increase in the well
head price for oil from this field. The revenue from the West Cameron Field is
not burdened with transportation cost as high as that of other fields from the
Sabine Pass Block 13 Field.
The decline in gas royalties is primarily due to the decreased production
from the Galveston Block 303 Field. Prices increased but not enough to offset
the decrease in production.
There were no wells drilled on the leases during this quarter.
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>
March 31, 1999.................................... 2,573 171,015 .26 .17
June 30, 1999..................................... 4,710 28,913 .13 .16
September 30, 1999................................ 2,791 51,287 .19 .24
December 31, 1999................................. 2,736 68,643 .19 .17
March 31, 2000.................................... 4,104 29,869 .16 .13
</TABLE>
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
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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 of
royalty payments to the Trust, which are conducted 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. As of the date of this report, the Trust has not
experienced any significant disruptions to financial or operating activities as
a result of the Year 2000 issues. There were no internal system disruptions and
the Trust is not aware of any failures affecting third parties that conduct the
Trust's operations. The Trust will continue to monitor the situation for any
internal or third party disruptions, but expects none at this time. Costs
incurred by the Trust related to Year 2000 issues were not material.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2000 AND 1999
During the quarters ended March 31, 2000 and 1999, Tidelands Royalty B
Corporation determined that $32,500 and $37,792 respectively, was no longer
required to be reserved for possible royalty overpayments. Accordingly accounts
payable was reduced and oil and gas royalties were increased by those amounts.
Net income for the current quarter amounted to $216,759 (including the
$32,500 release of the accounts payable reserve), down approximately 40% from
the $361,207 (including the $37,792 release of the accounts payable reserve),
realized in the comparable quarter a year ago.
Revenue from oil royalties increased to $120,758 in the current quarter
from $17,202 realized in the comparable period a year ago. Increases were
realized in sales quantities and price.
Revenue from gas royalties decreased 70% to $107,740 in the current quarter
from $354,988 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. The decline in sales quantities was partially offset
by the increase in price.
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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,
2000, and those realized in the comparable 1999 quarter, are presented in the
following table:
<TABLE>
<CAPTION>
2000 1999
------- --------
<S> <C> <C>
OIL
Barrels sold.............................................. 4,104 2,573
Average Price............................................. $29.42 $6.69
NATURAL GAS
Mcf sold.................................................. 29,869 171,015
Average price............................................. $2.52 $1.85
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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
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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"
Bank of America, N.A., Trustee
May 12, 2000 By: /s/ CINDY STOVER MILLER
-------------------------------------------------
Cindy Stover Miller
Vice President
May 12, 2000 By: /s/ R. RAY BELL
-------------------------------------------------
R. Ray Bell
Principal Accounting Officer
</TABLE>
9
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
<PAGE> 12
TIDELANDS ROYALTY TRUST "B"
C/O BANK OF AMERICA, 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,419,528
<SECURITIES> 0
<RECEIVABLES> 87,464
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,506,992
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,506,994
<CURRENT-LIABILITIES> 538,417
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 968,575
<TOTAL-LIABILITY-AND-EQUITY> 1,506,994
<SALES> 228,498
<TOTAL-REVENUES> 244,663
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 220,758
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 216,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216,458
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.16
</TABLE>
