<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, 1999
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:
BANK OF AMERICA, NA
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 February 18, 2000: $3,623,954.
Number of Units of Beneficial Interest outstanding as of the close of the
period covered by this report: December 31, 1999 -- 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, 1999, 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 7A. Quantitative and Qualitative Disclosures About
Market Risk................................... 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
PART IV ..................................................... Miscellaneous
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. Bank of
America, N.A. serves as corporate 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.
As of December 31, 1999, Chevron and others held interests in six leases
subject to Tidelands' interests in five of the 60 tracts in the Royalty Area.
Leases on all six 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 five
leases covering 22,948 acres in the Royalty Area. Chevron has retained an
interest in one lease covering 4,364 acres in the Royalty Area.
<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 1999, approximately 17% of Tidelands' royalty revenues were attributable
to oil and approximately 83% 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.
During 1999 Tidelands received royalty payments from nine working interest
owners. The following table shows the percentage received each year for the past
3 years for those working interest owners accounting for over 5% of the Trust's
royalty receipts during any of the last three years:
<TABLE>
<CAPTION>
COMPANY 1999 1998 1997
------- ---- ---- ----
<S> <C> <C> <C>
American Explorer Company................................. -- 18% --
Burlington Resources...................................... 6% 42% 34%
Chevron, USA.............................................. 7% 8% 13%
Pennzoil Exploration and Production Company............... 81% 30% 41%
</TABLE>
Tidelands derives no revenues from foreign sources and has no export sales.
Tidelands and Tidelands Corporation have no direct employees.
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 1999 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>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Quantity of royalty oil and gas sold
Oil (in barrels ("bbls"))......................... 12,810 9,935 10,348
Gas (in thousand cubic feet ("mcf")).............. 319,858 405,336 495,734
Weighted average sales price
for royalty oil and gas sold
Oil (per bbl)(1).................................. $14.73 $8.90 $14.04
Gas (per mcf)..................................... $ 2.87 $2.81 $ 2.25
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
2
<PAGE> 5
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.
Interests in Properties. Tidelands' properties consist of production
payments and overriding royalty interests in 6 oil and gas leases covering
27,312 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............................................... 8
--
--
Gross Leased Acres --
Productive........................................ 27,312
======
</TABLE>
Information regarding net wells or acres is not included since Tidelands
does not own any working interests.
Productive Properties. Productive properties cover 27,312 gross acres under
6 different leases. These 6 leases contain 11 wells. Three of these wells
produce oil, and 8 wells 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 through June 1999, 1998 and 1997. Only fields that were producing at the
end of the six-month period are listed. Production from these fields accounted
for substantially all of Tidelands' distributable income in 1999. The
information in the table is based upon data obtained from the Petroleum
Information Corporation. The information for the period ended June 1999 is the
most recent production information available to Tidelands from the Petroleum
Information Corporation. Information for the periods ended June 1998 and 1997 is
included for comparison purposes.
<TABLE>
<CAPTION>
NET MCF GAS & OIL
YEAR EQUIVALENT PER DAY(1)
FIRST -----------------------
FIELD PRODUCED 1999 1998 1997
----- -------- ----- ----- -----
<S> <C> <C> <C> <C>
Offshore Texas
Galveston Block 303................... 1987 117 713 450
High Island Block 128................. 1989 51 37 130
Offshore Louisiana
Sabine Pass Block 13.................. 1981 193 222 177
West Cameron Block 165................ 1969 751 97 372
West Cameron Block 225................ 1969 12 33 4
West Cameron Block 333(2)............. 1978 -- 10 47
</TABLE>
- ---------------
(1) Net oil production is reflected in the amount of its mcf equivalent of
natural gas on a btu basis.
(2) The lease on West Cameron Block 333 field was released by the working
interest owner.
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 approximately 1,000,000 of the 1,370,000 acres are
leased. This leaves approximately 370,000 acres available for leasing in
3
<PAGE> 6
the Royalty Area. The bulk of the unleased acreage is located in an area about
50 miles southeast of Galveston, Texas.
Present Activities. Tidelands currently receives royalties from oil and
natural gas sold from all of the leases in the Royalty Area, although delivery
quantities are subject to seasonal demand.
Published reports indicate that during 1999, Chevron and Elf did not bid on
any lease located in the Royalty Area in the two federal lease sales held during
that year.
The Minerals Management Service of the United States Department of the
Interior received bids in a lease sale in the Central Gulf area on March 15,
2000. The sale covers a portion of the Royalty Area that lies in the West
Cameron area.
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 the 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 1999, 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 420 unitholders of record as of March 9, 2000. 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
1999.
The units of beneficial interest in Tidelands trade in the over-the-counter
market and are listed in the NASD's Bulletin Board under the symbol "TIRTZ".
There is limited trading in Tidelands' units of beneficial interest. 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
YEAR ENDED -------------- DISTRIBUTIONS
DECEMBER 31, HIGH LOW (PER UNIT)
------------ ----- ----- -------------
<S> <C> <C> <C>
1998
First quarter......................... $7.00 $6.00 $.19
Second quarter........................ 6.13 5.75 .24
Third quarter......................... 5.88 4.88 .29
Fourth quarter........................ 6.00 4.88 .08
1999
First quarter......................... $4.87 $4.62 $.17
Second quarter........................ 4.87 4.62 .16
Third quarter......................... 4.87 4.50 .24
Fourth quarter........................ 4.56 4.00 .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, 1999, nor has it passed
upon its accuracy or adequacy. While Tidelands' complete Form 10-K (excluding
exhibits) for the year ended December 31, 1999, is included in Tidelands' 1999
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.
Cindy Stover Miller, Bank of America, N.A., P.O. Box 830241, Dallas, Texas
75283-0241.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income -- oil and gas royalties...... $1,108,019 $1,228,313 $1,262,876 $1,103,926 $ 978,172
Net income........................... 1,070,861 $1,192,688 $1,234,986 $1,076,335 $ 965,004
Net income per unit.................. $.77 $.86 $.89 $.78 $.70
Distributions to unitholders......... 1,028,369 $1,103,637 $1,165,924 $1,029,524 $ 960,169
Distributions per unit............... $.74 $.80 $.84 $.74 $.69
Total assets......................... $1,560,219 $1,645,925 $2,421,226 $1,945,260 $1,905,164
</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
administrative 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
Primarily due to a decrease in gas production, distributions to unitholders
amounted to $.74 per unit in 1999, a decrease of $.06 from the $.80 distributed
in 1998. Net income for 1999 was $.77 per unit, down about 10% from $.86
realized in 1998.
Oil and gas prices increased during 1999. The average price received by
Tidelands for oil was $14.73 in 1999, an increase of 66% over the $8.90 received
in 1998. The average price received by Tidelands for gas was $2.87 in 1999 an
increase of 2% over the $2.81 received in 1998.
Tidelands realized 83% of its royalty revenue from the sale of gas in 1999.
Oil revenue has increased from 7% in 1998 to 17% in 1999 due to condensate
production from a well in the West Cameron Block 165 field. While the mcf
equivalent of oil and gas production changed only slightly from 1998 to 1999,
production decreased from Galveston Block 303 and significantly increased from
West Cameron Block 165.
Tidelands' overriding royalty interest covers a total area of 27,312 acres
all of which is producing. During 1999 the lease on West Cameron Block 332
(4,063 acres) was released by its owner.
Each of Tidelands' producing properties has paid out its $1,500,000
production payment and, therefore, Tidelands' present royalty interests
(4.17%)in such properties will not be further reduced.
Tidelands has retained a funded reserve for possible royalty overpayments
received by Tidelands in various years from 1988 through 1993. During the years
ended December 31, 1999 and 1998, respectively, Tidelands restored to income
$258,902 and $340,485 of its contingency reserve that management determined was
no longer needed to cover refunds that may be required upon redetermination of
gas prices for royalty payments in prior periods. Net income per unit was
increased $.19 and $.25 in 1999 and 1998, respectively by this decision.
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.
Important aspects of Tidelands' operations are conducted by third parties.
As of the date of this report, Tidelands 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 Tidelands is not aware of
any failures affecting third parties that conduct Tidelands' operations.
Tidelands will continue to monitor the situation for any internal or third party
disruptions, but expects none at this time. Costs incurred by Tidelands related
to Year 2000 issues were not material.
Tidelands does not have any reportable quantitative or qualitative market
risk disclosure.
OIL AND GAS ROYALTIES -- 1999 AND 1998
Income from oil and gas royalties decreased 10% in 1999 as compared to
1998. Gas royalties accounted for 83% of income from royalties in 1999. The
price received for gas during 1999 increased 2% from 1998 to $2.87 per mcf.
The following table presents comparative operating data which reflects
these underlying circumstances.
COMPARATIVE OPERATING DATA
<TABLE>
<CAPTION>
CHANGE FROM
1998 TO 1999
-------------------
1999 1998 AMOUNT PERCENT
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
Income:
Oil royalties(1)...................... $ 188,643 $ 88,389 $ 100,254 113%
Gas royalties......................... 919,376 1,139,924 (220,548) (19)%
---------- ---------- ---------
$1,108,019 $1,228,313 $(120,294) (10)%
========== ========== =========
Net production quantities
Oil (bbls)............................ 12,810 9,935 2,875 29%
Gas (mcf)............................. 319,858 405,336 (85,478) (21)%
Average net prices
Oil(1)................................ $ 14.73 $ 8.90 $ 5.83 66%
Gas................................... $ 2.87 $ 2.81 $ .06 2%
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
OIL AND GAS ROYALTIES -- 1998 AND 1997
Income from oil and gas royalties decreased 3% in 1998 as compared to 1997.
Gas royalties increased 2% and accounted for 93% of income for 1998. These
increases primarily were caused by the increase in revenue from the reduction of
the reserve for gas price adjustments. See "-- General." Average oil prices
decreased 37% and average gas prices decreased 12%.
8
<PAGE> 11
The following table presents comparative operating data which reflects
these underlying circumstances.
COMPARATIVE OPERATING DATA
<TABLE>
<CAPTION>
CHANGE FROM
1997 TO 1998
------------------
1998 1997 AMOUNT PERCENT
---------- ---------- -------- -------
<S> <C> <C> <C> <C>
Income:
Oil royalties(1)............................... $ 88,389 $ 145,259 $(56,870) (39)%
Gas royalties.................................. 1,139,924 1,117,617 22,307 2%
---------- ---------- --------
$1,228,313 $1,262,876 $(34,563) (3)%
========== ========== ========
Net production quantities
Oil (bbls)..................................... 9,935 10,348 $ (413) (4)%
Gas (mcf)...................................... 405,336 495,734 (90,398) (18)%
Average net prices
Oil(1)......................................... $ 8.90 $ 14.04 $ (5.14) (37)%
Gas(2)......................................... $ 2.81 $ 2.25 $ .56 25%
</TABLE>
- ---------------
(1) These amounts are net of the cost of transportation from offshore leases to
onshore receiving points.
(2) The average price in 1998 includes $.84 per mcf attributable to the $340,485
reserve reduction. The average price for gas produced and sold in 1998 was
$1.97.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Tidelands' consolidated financial statements listed in the following index,
together with the related notes and the report of KPMG LLP, independent
certified public accountants, are presented on pages F-1 and F-7 hereof:
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
- -- Independent Auditors' Report................................ F-1
- -- Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... F-2
- -- Consolidated Statements of Income and Undistributed Income
for the Three Years Ended December 31, 1999............... F-3
- -- Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1999................................... F-4
- -- Notes to Consolidated Financial Statements.................. F-5
</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 1999 and 1998 there were no disagreements by Tidelands with its
principal accountants on any matter of accounting principles or practices or
financial statement disclosure.
9
<PAGE> 12
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.
Bank of America, N.A. is the corporate trustee (the "Corporate Trustee").
During 1998, Chas. G. McBurney, the individual trustee, resigned for
personal reasons. Although the instruments pursuant to which Tidelands was
created provide for an individual trustee, none of the individuals identified
therein as possible individual trustees currently are available to serve as the
individual trustee. The Corporate Trustee of Tidelands believes that the duties
of the individual trustee can be administered by Mr. R. Ray Bell, the principal
accounting officer of Tidelands. The Corporate Trustee of Tidelands also
believes that Tidelands likely would incur substantial expenses in recruiting
and electing a new individual trustee. The Indenture pursuant to which Tidelands
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 Tidelands. In
order to reduce the expenses to be incurred in electing a new individual
trustee, Tidelands 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 where to extend the term of the Indenture. The Corporate Trustee
of Tidelands has not determined when, or if, either such matter will be
presented to the holders of units of beneficial interest.
The trustees have entered into an arrangement with Marine Petroleum
Corporation (a wholly-owned subsidiary of Marine Petroleum Trust, a 32.6%
unitholder 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 72 years
old, and since July 1, 1977, Mr. Bell has been employed by Marine Petroleum
Corporation, a subsidiary of Marine Petroleum Trust, as president, 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, 1999, Tidelands paid or
accrued fees of $17,471 to Bank of America, N.A., as corporate trustee.
During Tidelands' fiscal year ended December 31, 1999, Tidelands paid
$28,674 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.
10
<PAGE> 13
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 1998 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>
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
<TABLE>
<C> <S>
3.1 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).
21.1 Subsidiaries of Tidelands.
27.1 Financial Data Schedule
</TABLE>
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Trustee
Tidelands Royalty Trust "B":
We have audited the accompanying consolidated balance sheets of Tidelands
Royalty Trust "B" ("Tidelands") and subsidiary as of December 31, 1999 and 1998,
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,
1999. These consolidated financial statements are the responsibility of
Tidelands' 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, 1999 and 1998 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Dallas, Texas
March 3, 2000
F-1
<PAGE> 15
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $1,464,127 $1,525,131
Oil and gas royalties receivable.......................... 96,090 113,214
Federal income taxes receivable........................... -- 7,578
---------- ----------
Total current assets............................ 1,560,217 1,645,923
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$1,560,219 $1,645,925
========== ==========
LIABILITIES AND TRUST EQUITY
Current liabilities:
Accounts payable (note 3)................................. $ 385,015 $ 645,567
Income distributable to unitholders....................... 239,477 107,334
Federal income tax payable................................ 211 --
---------- ----------
Total current liabilities....................... 624,703 752,901
---------- ----------
Trust equity:
Corpus -- authorized 1,386,525 units of beneficial
interest,
issued 1,386,375 units at nominal value................ 2 2
Undistributed income (note 2)............................. 935,514 893,022
---------- ----------
Total trust equity.............................. 935,516 893,024
---------- ----------
$1,560,219 $1,645,925
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 16
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Income:
Oil and gas royalties.................................. $1,108,019 $1,228,313 $1,262,876
Interest and other..................................... 66,786 76,569 77,861
---------- ---------- ----------
Total income................................. 1,174,805 1,304,882 1,340,737
---------- ---------- ----------
Expenses:
General and administrative............................. 87,144 99,194 89,751
---------- ---------- ----------
Income before federal income taxes........... 1,087,661 1,205,688 1,250,986
Federal income taxes of subsidiary (note 1(d))........... 16,800 13,000 16,000
---------- ---------- ----------
Net income................................... 1,070,861 1,192,688 1,234,986
Undistributed income at beginning of year................ 893,022 803,971 734,909
---------- ---------- ----------
1,963,883 1,996,659 1,969,895
Distributions to unitholders............................. 1,028,369 1,103,637 1,165,924
---------- ---------- ----------
Undistributed income at end of year...................... $ 935,514 $ 893,022 $ 803,971
========== ========== ==========
Net income per unit...................................... $.77...... $.86 $.89
Distributions per unit................................... $.74...... $.80 $.84
Weighted average units outstanding....................... 1,386,375 1,386,375 1,386,375
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 17
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 1,070,861 $1,192,688 $ 1,234,986
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in assets and liabilities:
Oil and gas royalties receivable.............. 17,124 46,523 15,275
Federal income taxes receivable............... 7,578 (4,000) 3,648
Accounts payable.............................. (260,552) (342,074) 4,208
Federal income tax payable.................... 211 -- --
----------- ---------- -----------
Net cash provided by operating
activities............................... 835,222 893,137 1,258,117
----------- ---------- -----------
Cash flows from financing activities -- cash
distributions to unitholders....................... (896,226) (1,625,915) (763,228)
----------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents.............................. (61,004) (732,778) 494,889
Cash and cash equivalents at beginning of year....... 1,525,131 2,257,909 1,763,020
----------- ---------- -----------
Cash and cash equivalents at end of year............. $ 1,464,127 $1,525,131 $ 2,257,909
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 18
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
(a) General
Tidelands 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 Tidelands 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 7%, 8% and 13% of total royalty revenue for the years ended
December 31, 1999, 1998 and 1997, respectively. Royalty revenue received from
Pennzoil Exploration and Production Company totaled approximately 81%, 30%, and
41% for the years ended December 31, 1999, 1998 and 1997, respectively. Royalty
revenue from American Explorer Company totaled 18% for the year ended December
31, 1998. In addition, royalty revenue from Burlington Resources Oil and Gas
Company accounted for approximately 6%, 42% and 34% of total royalty revenue for
the years ended December 31, 1999, 1998 and 1997, respectively. No other
companies accounted for more than 10% of the Trust's royalty revenues during the
year ended December 31, 1999, 1998 or 1997.
Tidelands is required under its indenture to distribute all income, after
paying its liabilities and obligations, to the unitholders quarterly. Tidelands
cannot invest any of the money of Tidelands for any purpose and cannot engage in
a trade or business.
Tidelands' wholly-owned subsidiary, Tidelands Royalty "B" Corporation
("Tidelands Corporation"), holds title to interests in properties 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 is authorized to pay expenses of Tidelands Corporation
should it be necessary.
Tidelands 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. General and
administrative expenses totaled $87,144, $99,194 and $89,751 for the years ended
December 31, 1999, 1998, and 1997, respectively.
At December 31, 1999 and 1998, Marine Petroleum Trust owned 32.6% of
Tidelands' outstanding units of beneficial interest.
(b) Principles of Consolidation
The consolidated financial statements include Tidelands 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 Tidelands was established, no determinable market value was
available for the assets transferred to Tidelands; consequently, nominal values
were assigned. Accordingly, no allowance for depletion has been computed.
Tidelands' revenues are derived from production payments and overriding
royalty interests related to properties located in the Gulf of Mexico.
Net revenues from oil and gas royalties related to proved developed oil and
gas reserves were $1,108,019, $1,228,313 and $1,262,876 in 1999, 1998 and 1997,
respectively.
F-5
<PAGE> 19
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 Tidelands' 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% of
oil and gas royalties to be distributed to Tidelands and after deducting
statutory depletion.
(e) Credit Risk Concentration and Cash Equivalents
Financial instruments which potentially subject Tidelands and its
wholly-owned subsidiary to concentrations of credit risk are primarily
investments in cash equivalents and unsecured oil and gas royalties receivable.
Tidelands 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 Tidelands historically has
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 $1,213,304 and $1,454,865 at December 31, 1999 and
1998, respectively, consist of cash held in a money market account that invests
in U.S. Treasury securities. For purposes of the statements of cash flows,
Tidelands considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents.
(f) Statements of Cash Flows
Tidelands paid $9,011, $17,000 and $12,352 in federal income taxes in 1999,
1998 and 1997, respectively. No payments of interest were made in 1999, 1998 and
1997.
(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 $676,822 and $607,516 applicable to the
subsidiary corporation at December 31, 1999 and 1998, respectively.
(3) OVERPAID ROYALTIES
Tidelands has recorded a liability for possible royalty overpayments
received by Tidelands in various years from 1988 through 1993, which is
reflected in accounts payable in the accompanying consolidated balance sheets.
During 1999, 1998 and 1997, Tidelands determined that $258,902, $340,485, and
$0, respectively, was no longer required to be reserved, because it was no
longer probable that repayment of such amount actually would be required.
Accordingly, accounts payable was reduced and oil and gas royalties was
increased by such amount.
(4) SUPPLEMENTAL INFORMATION RELATING TO OIL AND GAS RESERVES (UNAUDITED)
Oil and gas reserve information relating to Tidelands' royalty interests is
not presented because such information is not available to Tidelands. Tidelands'
share of oil and gas produced for its royalty interests was
F-6
<PAGE> 20
TIDELANDS ROYALTY TRUST "B" AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as follows: oil (barrels) -- 12,810 in 1999, 9,935 in 1998 and 10,348 in 1997;
and gas (mcf) -- 319,858 in 1999, 405,336 in 1998 and 495,734 in 1997.
(5) SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly financial information for the years ended December
31, 1999 and 1998 is unaudited; however, in the opinion of management, all
adjustments necessary to present a fair statement of the results of operations
for the interim periods have been included.
<TABLE>
<CAPTION>
OIL AND GAS NET NET INCOME
ROYALTIES INCOME PER UNIT
----------- ---------- ----------
<S> <C> <C> <C>
Quarter ended:
March 31, 1999............................... $ 372,190 $ 361,207 $ .26
June 30, 1999................................ 198,294 184,848 .13
September 30, 1999........................... 272,059 265,053 .19
December 31, 1999............................ 265,476 259,753 .19
---------- ---------- -----
$1,108,019 $1,070,861 $ .77
========== ========== =====
Quarter ended:
March 31, 1998............................... $ 467,245 $ 460,550 $ .33
June 30, 1998................................ 251,970 234,165 .17
September 30, 1998........................... 191,244 187,013 .13
December 31, 1998............................ 317,854 310,960 .23
---------- ---------- -----
$1,228,313 $1,192,688 $ .86
========== ========== =====
</TABLE>
F-7
<PAGE> 21
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: Bank of America, N.A.
(in its capacity as Corporate
Trustee
of Tidelands Royalty Trust "B"
and not in its individual capacity
or otherwise)
Date: March 27, 2000 By: /s/ CINDY STOVER MILLER
----------------------------------
Cindy Stover Miller
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>
Bank of America, N.A. Corporate Trustee March 27, 2000
By: /s/ CINDY STOVER MILLER
-------------------------------------------------
Cindy Stover Miller
Vice President
/s/ R. RAY BELL Principal Accounting Officer March 27, 2000
- -----------------------------------------------------
R. Ray Bell
</TABLE>
<PAGE> 22
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
21.1 Subsidiaries of Tideland Royalty Trust "B"
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of
Tidelands
1) Tidelands Royalty "B" Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,464,127
<SECURITIES> 0
<RECEIVABLES> 96,090
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,560,217
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,560,219
<CURRENT-LIABILITIES> 624,703
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 935,514
<TOTAL-LIABILITY-AND-EQUITY> 1,560,219
<SALES> 1,108,019
<TOTAL-REVENUES> 1,174,805
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 87,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,087,661
<INCOME-TAX> 16,800
<INCOME-CONTINUING> 1,070,861
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,070,861
<EPS-BASIC> .77
<EPS-DILUTED> .77
</TABLE>
