<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 SEPTEMBER 30, 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)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate number of units of beneficial interest outstanding as of the last
practicable date.
<TABLE>
<CAPTION>
Title of Each Class of Units Number of Units of Beneficial Interest
of Beneficial Interest September 30, 2000
---------------------------- --------------------------------------
<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 September 30, 2000 and
December 31, 1999......................................... 2
Condensed Consolidated Statements of Income and
Undistributed Income -- Three Months and Nine Months Ended
September 30, 2000 and 1999............................... 3
Condensed Consolidated Statements of Cash Flows -- Nine
Months Ended September 30, 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
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 9
Signatures.................................................. 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $1,494,884 $1,464,127
Oil and gas royalties receivable.......................... 203,882 96,090
---------- ----------
Total current assets.............................. 1,698,766 1,560,217
Oil, gas and other mineral properties....................... 2 2
---------- ----------
$1,698,768 $1,560,219
========== ==========
LIABILITIES AND TRUST EQUITY
Current Liabilities:
Accounts payable.......................................... $ 133,843 $ 385,015
Income distributable to unitholders....................... 464,906 239,477
Federal income taxes payable.............................. 8,551 211
---------- ----------
Total current liabilities......................... $ 607,300 $ 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...................................... 1,091,466 935,514
---------- ----------
Total trust equity................................ 1,091,468 935,516
---------- ----------
$1,698,768 $1,560,219
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Oil and gas royalties...................... $ 633,667 $ 272,059 $1,109,787 $ 842,543
Interest and other......................... 19,112 16,448 53,300 49,825
---------- ---------- ---------- ----------
Total income....................... 652,779 288,507 1,163,087 892,368
---------- ---------- ---------- ----------
Expenses:
General and administrative................. 22,617 19,379 74,912 70,670
---------- ---------- ---------- ----------
Income before Federal income
taxes............................ 630,162 269,128 1,088,175 821,698
Federal income taxes of subsidiary........... 12,828 4,075 20,828 10,590
---------- ---------- ---------- ----------
Net income......................... 617,334 265,053 1,067,347 811,108
Undistributed income at beginning of
period..................................... 939,034 987,039 935,516 893,022
---------- ---------- ---------- ----------
1,556,368 1,252,092 2,002,863 1,704,130
Distributions to unitholders................. 464,900 336,857 911,395 788,895
---------- ---------- ---------- ----------
Undistributed income at end of period........ $1,091,468 $ 915,235 $1,091,468 $ 915,235
========== ========== ========== ==========
Net income per unit.......................... $ .45 $ .19 $ .77 $ .59
========== ========== ========== ==========
Distributions per unit....................... $ .34 $ .24 $ .66 $ .57
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $1,067,347 $ 811,108
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in assets and liabilities:
Oil and gas royalties receivable....................... (107,792) (30,880)
Federal income taxes payable........................... 8,340 4,879
Accounts payable....................................... (251,172) (194,146)
---------- ----------
Net cash provided by operating activities............ 716,723 590,961
---------- ----------
Cash flows from financing activities -- distributions to
unitholders............................................... (685,966) (559,369)
Net increase (decrease) in cash and cash equivalents...... 30,757 31,592
Cash and cash equivalents at beginning of period............ 1,464,127 1,525,131
---------- ----------
Cash and cash equivalents at end of period.................. $1,494,884 $1,556,723
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 and nine months ended September 30,
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 September 30, 2000 consisted of $347,948
applicable to the Trust and $743,518 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
accounts payable of $127,234 at September 30, 2000 to cover refunds that may be
required for possible overpayments received on prior years' production payments.
TERM OF TRUST
The indenture pursuant to which the Trust was created (the "Indenture")
provides that the Trust will expire on April 30, 2001 unless extended by the
vote of the holders of a majority of the outstanding units of beneficial
interest. The trustee currently anticipates that before the expiration of the
Trust, the unitholders will be asked to approve an amendment to the Indenture to
extend the life of the Trust 20 years beyond the current expiration date of
April 30, 2001; however, there can be no assurance that such approval will be
obtained.
5
<PAGE> 7
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
The Trust realizes most of its revenue from the sale of natural gas, which
sales accounted for approximately 72% of revenue in the current nine month
period.
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 to the Trust 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>
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
June 30, 2000..................................... 1,178 83,371 .17 .19
September 30, 2000................................ 2,779 75,096 .45 .34
</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
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.
Additionally, the 1951 Contract will expire on April 30, 2001. Once the 1951
Contract expires, the
6
<PAGE> 8
Trust will not receive any royalty interests in additional oil and gas leases.
However, the expiration of the 1951 Contract will not affect the receipt of
royalty payments originating from leases in which the Trust currently has a
royalty interest.
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.
The Indenture pursuant to which the Trust was created provides that the
Trust will expire on April 30, 2001 unless extended by the vote of the holders
of a majority of the outstanding units of beneficial interest. The trustee
currently anticipates that before the expiration of the Trust, the unit holders
will be asked to approve an amendment to the Indenture to extend the life of the
Trust 20 years beyond the current expiration date of April 30, 2001; however,
there can be no assurance that such approval will be obtained.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net income increased 133% to $617,334 for the current three month period
ending September 30, 2000 over the $265,053 of net income realized in the
comparable period a year ago. The average price realized for oil and gas
increased in the current period over the average price realized during the same
period a year ago. Oil production was essentially unchanged while natural gas
production was down 4% from the results of the comparable period a year ago. Net
income increased during both the current three month period and the comparable
period a year ago as a result of the reduction of the accounts payable reserve
which was established to provide for possible royalty overpayments received on
prior years' production payments. The amounts included in income were $219,035
and $71,138, respectively.
Revenues from oil royalties increased 86% during the current three month
period from the comparable period a year ago. The average price received for oil
in the current period amounted to $32.87 as compared to $17.79 for the
comparable period a year ago.
Revenues from natural gas royalties were up 113% in the current period over
the results of the corresponding period a year ago. The volume of natural gas
sold decreased 4%. The average price of natural gas increased to $4.29 from
$2.95 for the same period a year ago. The average prices of natural gas for the
current three month period and the comparable three month period of the prior
year do not include $219,035 and $71,138, respectively, of additional income
resulting from the reduction of accounts payable for possible overpayments
received on prior years' production payments.
There were no changes in the number of leases in which the Trust has an
interest and no wells were drilled during the three months ended September 30,
2000.
7
<PAGE> 9
The quantities of oil and gas sold and average prices realized from current
operations, without revenues realized from the reduction of the accounts payable
reserve as described above, for the three months ended September 30, 2000 and
1999, are presented in the following table.
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Oil
Barrels sold............................................ 2,805 2,791
Average price........................................... $ 32.87 $ 17.79
Gas
Mcf sold................................................ 75,096 51,287
Average price........................................... $ 4.29 $ 2.95
</TABLE>
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.
Net income of $1,067,347 for the current nine months ending September 30,
2000 was 32% more than the $811,108 realized in the comparable period a year
ago. The average prices realized for oil and gas were up while production
decreased. Net income increased during both the current nine month period and
the comparable period a year ago as a result of the reduction of the accounts
payable reserve which was established to provide for possible claims resulting
from production payments in prior periods. The amounts included in income were
$251,535 and $192,402, respectively.
Revenues from oil royalties increased 87% during the current nine month
period over the results of the comparable period a year ago. The average price
received for oil in the current period amounted to $30.22 as compared to $12.91
during the same period a year ago.
Revenues from natural gas royalties from current production were up 18%
over the comparable period a year ago. The volume of natural gas sold in the
current period declined 25% while the average price increased to $3.26 from
$2.07 for the same period a year ago. Average prices for natural gas do not
include $251,535 and $192,402 realized from the reduction of accounts payable
reserve for the nine month periods ended September 30, 2000 and 1999,
respectively.
There were no changes in the number of leases in which the Trust has an
interest and no wells were drilled during the six months ended September 30,
2000.
The quantities of oil and gas sold and average prices realized from current
operations, without the revenues realized from the reduction of the accounts
payable reserve as described above, for the nine months ended September 30, 2000
and 1999 are presented in the following table.
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Oil
Barrels sold.......................................... 8,061 10,074
Average price......................................... $ 30.22 $ 12.91
Gas
Mcf sold.............................................. 188,336 251,215
Average price......................................... $ 3.26 $ 2.07
</TABLE>
8
<PAGE> 10
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
9
<PAGE> 11
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
November 13, 2000 By: /s/ CINDY STOVER MILLER
-------------------------------------------------
Cindy Stover Miller
Vice President
November 13, 2000 By: /s/ R. RAY BELL
-------------------------------------------------
R. Ray Bell
Principal Accounting Officer
</TABLE>
10
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
