SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Commission File No. 1-8033
PERMIAN BASIN ROYALTY TRUST
Texas I.R.S. No. 75-6280532
Bank of America, N.A., Trust Department
P. O. Box 1317
Fort Worth, Texas 76101
Telephone Number 817/390-6905
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___
Number of Units of beneficial interest outstanding at November 12,
1999: 46,608,796
Page 1 of 17
<PAGE>
PERMIAN BASIN ROYALTY TRUST
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared
by Bank of America, N.A. as Trustee for the Permian Basin Royalty
Trust, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements have been
condensed or omitted pursuant to such rules and regulations, although
the Trustee believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the Trust's
latest annual report on Form 10-K. In the opinion of the Trustee, all
adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the assets, liabilities and trust corpus
of the Permian Basin Royalty Trust at September 30, 1999, and the
distributable income and changes in trust corpus for the three-month
and nine-month periods ended September 30, 1999 and 1998 have been
included. The distributable income for such interim periods is not
necessarily indicative of the distributable income for the full year.
Deloitte & Touche LLP, independent certified public accountants, has made
a limited review of the condensed financial statements as of
September 30, 1999 and for the three-month and nine-month periods ended
September 30, 1999 and 1998 included herein.
-2-
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Bank of America, N.A. as Trustee
for the Permian Basin Royalty Trust:
We have reviewed the accompanying condensed statement of assets,
liabilities and trust corpus of the Permian Basin Royalty Trust as of
September 30, 1999 and the related condensed statements of
distributable income and changes in trust corpus for the three-month
and nine-month periods ended September 30, 1999 and 1998. These
financial statements are the responsibility of the Trustee.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
The accompanying condensed financial statements are prepared on a
modified cash basis as described in Note 1, which is a comprehensive
basis of accounting other than generally accepted accounting
principles.
Based on our reviews, we are not aware of any material modifications
that should be made to such condensed financial statements for them to
be in conformity with the basis of accounting described in Note 1.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of assets, liabilities and trust
corpus of the Permian Basin Royalty Trust as of December 31, 1998, and
the related statements of distributable income and changes in trust
corpus for the year then ended (not presented herein); and in our
report dated March 8, 1999, we expressed an unqualified opinion on
those financial statements. In our opinion, the information set forth
in the accompanying condensed statement of assets, liabilities and
trust corpus as of December 31, 1998 is fairly stated, in all material
respects, in relation to the statement of assets, liabilities and
trust corpus from which it has been derived.
DELOITTE & TOUCHE LLP
October 29, 1999
-3-
<PAGE>
<TABLE>
<CAPTION>
PERMIAN BASIN ROYALTY TRUST
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
- ------------------------------------------------------------------------------------
September 30, December 31,
ASSETS 1999 1998
(Unaudited)
<S> <C> <C>
Cash and short-term investments $ 2,227,400 $ 525,193
Net overriding royalty interests in producing
oil and gas properties (net of accumulated
amortization of $7,964,508 and $7,638,633 at
September 30, 1999 and December 31, 1998,
respectively) 3,010,708 3,336,583
--------- ---------
$ 5,238,108 $ 3,861,776
========= =========
LIABILITIES AND TRUST CORPUS
Distribution payable to Unit holders $ 2,227,400 $ 525,193
Commitments and contingencies
Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding 3,010,708 3,336,583
--------- ---------
$ 5,238,108 $ 3,861,776
========= =========
<CAPTION>
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
- ---------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Royalty income $5,965,535 $2,406,272 $11,698,796 $9,258,812
Interest income 7,821 1,997 14,822 19,910
--------- --------- --------- ---------
5,973,356 2,408,269 11,713,618 9,278,722
General and administrative
expenditures 48,635 50,890 308,975 323,892
--------- --------- --------- ---------
Distributable income $5,924,721 $2,357,379 $11,404,643 $8,954,830
========= ========= ========== =========
Distributable income per Unit
(46,608,796 Units) $ .127115 $ .050578 $ .244688 $ .192128
========== ========= ========== ==========
<FN>
The accompanying notes to condensed financial statements are an integral part of these statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
PERMIAN BASIN ROYALTY TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Trust corpus, beginning of period $ 3,137,915 $ 3,411,371 $ 3,336,583 $ 3,496,594
Amortization of net overriding
royalty interests (127,207) (36,044) (325,875) (121,267)
Distributable income 5,924,721 2,357,379 11,404,643 8,945,830
Distributions declared (5,924,721) (2,357,379) (11,404,643) (8,954,830)
---------- ---------- ----------- ----------
Trust corpus, end of period $ 3,010,708 $ 3,375,327 $ 3,010,708 $ 3,375,327
========== ========== ========== ==========
<FN>
The accompanying notes to condensed financial statements are an integral part of this statement.
</FN>
</TABLE>
-5-
<PAGE>
PERMIAN BASIN ROYALTY TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- ---------------------------------------------------------------------
1. BASIS OF ACCOUNTING
The Permian Basin Royalty Trust ("Trust") was established as of
November 1, 1980. The net overriding royalties conveyed to the
Trust include: (1) a 75% net overriding royalty carved out of
Southland Royalty Company's fee mineral interests in the Waddell
ranch in Crane County, Texas (the "Waddell Ranch properties"); and
(2) a 95% net overriding royalty carved out of Southland Royalty
Company's major producing royalty interests in Texas (the "Texas
Royalty properties"). The net overriding royalty for the Texas
Royalty properties is subject to the provisions of the lease
agreements under which such royalties were created. The financial
statements of the Trust are prepared on the following basis:
- Royalty income recorded for a month is the amount computed and
paid to Bank of America, N.A. ("Trustee") as Trustee for the
Trust by the interest owners: Burlington Resources Oil & Gas
Company ("BROG") for the Waddell Ranch properties and Riverhill
Energy Corporation ("Riverhill Energy"), formerly a wholly owned
subsidiary of Riverhill Capital Corporation ("Riverhill Capital")
and formerly an affiliate of Coastal Management Corporation
("CMC"), for the Texas Royalty properties. CMC currently
conducts all field, technical and accounting operations on behalf
of BROG with regard to the Waddell Ranch properties. CMC also
conducts the accounting operations for the Texas Royalty
properties on behalf of Riverhill Energy. Royalty income
consists of the amounts received by the owners of the interest
burdened by the net overriding royalty interests ("Royalties")
from the sale of production less accrued production costs,
development and drilling costs, applicable taxes, operating
charges, and other costs and deductions multiplied by 75% in the
case of the Waddell Ranch properties and 95% in the case of the
Texas Royalty properties.
As was previously reported, in February 1997, BROG sold its
interest in the Texas Royalty properties to Riverhill Energy.
The Trustee has been advised that in the first quarter of 1998,
Schlumberger Technology Corporation ("Schlumberger") acquired all
of the shares of stock of Riverhill Capital. Prior to such
acquisition by Schlumberger, CMC and Riverhill Energy were wholly
owned subsidiaries of Riverhill Capital. The Trustee has further
been advised that in connection with Schlumberger's acquisition
of Riverhill Capital, the shareholders of Riverhill Capital
acquired ownership of all of the shares of stock of Riverhill
Energy. Thus, the ownership in the Texas Royalty properties
referenced above remained in Riverhill Energy, the stock
ownership of which was acquired by the former shareholders of
Riverhill Capital.
- Trust expenses recorded are based on liabilities paid and cash
reserves established out of cash received or borrowed funds for
liabilities and contingencies.
- Distributions to Unit holders are recorded when declared by the
Trustee.
- Royalty income is computed separately for each of the conveyances
under which the Royalties were conveyed to the Trust. If monthly
costs exceed revenues for any conveyance ("excess costs"), such
excess cannot reduce royalty income from other conveyances, but
is carried forward with accrued interest to be recovered from
future net proceeds of that conveyance (see Note 3).
The financial statements of the Trust differ from financial
statements prepared in accordance with generally accepted
accounting principles ("GAAP") because revenues are not accrued in
the month of production and certain cash reserves may be
established for contingencies which would not be accrued
-6-
in financial statements prepared in accordance with GAAP.
Amortization of the Royalties calculated on a unit-of-production
basis is charged directly to trust corpus.
On July 5, 1999, NationsBank, N.A., Trustee of the Permian Basin
Royalty Trust, legally changed its name to Bank of America, N.A.
On July 23, 1999, Bank of America, N.A. (formerly known as
NationsBank, N.A.) was merged with and into Bank of America NT&SA,
with the resulting entity being called Bank of America, N.A. As a
result, immediately following the close of business on July 23,
1999, the remaining legal entity was Bank of America, N.A. As a
result of such merger, the Trustee of the Trust is Bank of America,
N.A., successor by merger to NationsBank, N.A.
2. FEDERAL INCOME TAXES
For Federal income tax purposes, the Trust constitutes a fixed
investment trust which is taxed as a grantor trust. A grantor
trust is not subject to tax at the trust level. The Unit holders
are considered to own the Trust's income and principal as though no
trust were in existence. The income of the Trust is deemed to have
been received or accrued by each Unit holder at the time such
income is received or accrued by the Trust and not when distributed
by the Trust.
The Royalties constitute "economic interests" in oil and gas
properties for Federal income tax purposes. Unit holders must
report their share of the revenues of the Trust as ordinary income
from oil and gas royalties and are entitled to claim depletion with
respect to such income.
The Trust has on file technical advice memoranda confirming the tax
treatment described above.
The classification of the Trust's income for purposes of the
passive loss rules may be important to a Unit holder. As a result
of the Tax Reform Act of 1986, royalty income will generally be
treated as portfolio income and will not offset passive losses.
3. EXCESS COSTS
In the calculation of royalty income for the months of June through
December 1998, costs exceeded revenues for the Waddell Ranch
properties underlying the Waddell Ranch Net Overriding Royalty
Conveyance by $1,218,732. Such excess costs were recovered from
net proceeds of the underlying Waddell Ranch properties during the
first quarter of 1999 and these properties are again contributing
Trust royalty income.
4. SUSPENSE PAYMENTS
During the month of September 1998, the Trust received and recorded
as royalty income $1,041,340 representing amounts that the Trust
had been advised had been previously held in suspense by BROG
relating to the Texas Royalty properties. The Trustee had been
advised that these amounts related to revenues received by BROG
prior to conveyance of its interest in the Texas Royalty properties
to Riverhill Energy in February 1998. This amount was included in
the October 15, 1998 distribution to Unit holders of record on
September 30, 1998. Subsequently, Riverhill Energy advised the
Trustee that an overpayment to the Trust was made in September 1998
with regard to such suspended funds in the amount of $521,183.
Pursuant to the provisions of the Texas Royalty Net Overriding
Conveyance dated effective November 1, 1980, Riverhill Energy had
offset the overpayment against royalty income attributable to the
Texas Royalty properties for the month of October 1998 leaving a
net amount due as a result of such overpayment of $172,648. Such
amount was recovered from future net proceeds attributable to the
underlying Texas Royalty properties before these properties could
again contribute to the Trust royalty income.
******
-7-
ITEM 2. TRUSTEE'S DISCUSSION AND ANALYSIS
FORWARD LOOKING INFORMATION
Certain information included in this report contains, and other
materials filed or to be filed by the Trust with the Securities and
Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the
Trust) may contain or include, forward looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended.
Such forward looking statements may be or may concern, among other
things, capital expenditures, drilling activity, development
activities, production efforts and volumes, hydrocarbon prices and the
results thereof, and regulatory matters. Although the Trustee
believes that the expectations reflected in such forward-looking
statements are reasonable, such expectations are subject to numerous
risks and uncertainties and the Trustee can give no assurance that
they will prove correct. There are many factors, none of which is
within the Trustee's control, that may cause such expectations not to
be realized, including, among other things, factors such as actual oil
and gas prices and the recoverability of reserves, capital
expenditures, general economic conditions, actions and policies of
petroleum-producing nations and other changes in the domestic and
international energy markets. Such forward looking statements
generally are accompanied by words such as "estimate," "expect,"
"predict," "anticipate," "goal," "should," "assume," "believe," or
other words that convey the uncertainty of future events or outcomes.
YEAR 2000 ISSUE
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results by the Year 2000. The Year 2000 issue affects virtually all
companies and organizations. If a company or organization does not
successfully address its Year 2000 issues, it may face material
adverse consequences.
As the Trust does not directly maintain any systems, the Trust will
not incur any direct costs related to the Year 2000 issue.
The Trustee has identified those vendors it believes could have an
impact on its day-to-day operations if their operations were
interrupted as a result of Year 2000 problems. The Trustee has made
formal inquiries to these vendors requesting information on their
state of readiness for the Year 2000. Through responses received and
other literature reviewed by the Trustee with respect to its vendors,
the Trustee believes that all significant vendors are currently
addressing the Year 2000 issue and plan to be compliant prior to the
Year 2000.
The Trustee has no reason to believe that its vendors will not be Year
2000 compliant prior to Year 2000. In the event the Trustee learns
that a vendor's system will not be Year 2000 compliant, the Trustee
will assess the potential risk and develop contingency plans at that
time.
The Trust is a passive entity with no business operations and the
information technology systems ("IT") employed by the Trustee in
connection with its duties on behalf of the Trust are less extensive
than the systems employed by many business entities. The Trust has no
formal IT budget and the Trust has not incurred any expenditures
relating to the Trustee's IT systems used in connection with the Trust
during 1999.
-8-
Because the royalty interests held by the Trust are fixed, the Trust
is dependent upon the third parties that hold operating interests with
respect thereto for the receipt of royalty income. Thus, if any such
third party failed to deliver royalty income, the Trust would have no
alternative source for such income. The Trustee believes that the
worst case scenario would be the failure by one or more of the third
parties who pay royalties to the Trust or who make distributions to
Unit holders for the Trust to identify and remediate Year 2000
problems on a timely basis, which could cause the Trustee to be unable
to make required distributions to Unit holders. With respect to a
failure by a third party to deliver royalty income or make
distributions to Unit holders on a timely basis, the Trustee believes
that it would have no control over the efforts of such third party to
correct the problems, and significant delays in the receipt of royalty
income and distributions to Unit holders could result.
There can be no guarantee that the Trustee will be able to identify
all potential Year 2000 problems or fully remediate all Year 2000
problems identified on a timely basis. There can be no assurance that
the systems of the Trustee or third party vendors on which the Trust
relies will be timely remediated. The failure by the Trustee or any
such third party to fully remediate its Year 2000 problems on a timely
basis could have a material adverse affect on the Trustee's ability to
receive revenue, account for and make timely distribution of the
Trust's distributable income.
Certain of the statements made above regarding the Trustee's Year 2000
program are forward looking statements, and there can be no assurance
that the Trustee will be able to achieve Year 2000 compliance in the
manner and by the dates indicated above.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
For the quarter ended September 30, 1999, royalty income received by
the Trust amounted to $5,965,535 compared to royalty income of
$2,406,272 during the third quarter of 1998. The increase in royalty
income is primarily attributable to an increase in average oil and gas
prices as well as a decrease in allocated capital expenditures
compared to the third quarter of 1998. In the calculation of royalty
income for the months of July through September 1998, costs exceeded
revenues for the Waddell Ranch properties underlying the Waddell Ranch
Net Overriding Royalty Conveyance by $512,498. Such excess costs were
recovered from net proceeds of the underlying Waddell Ranch properties
during the first quarter of 1999 and these properties are again
contributing trust royalty income.
During the month of September 1998, the Trust received and recorded as
royalty income $1,041,340 representing amounts that the Trustee had
been advised had been previously held in suspense by BROG relating to
the Texas Royalty properties. The Trustee had been advised that these
amounts related to revenues received by BROG prior to the conveyance
of its interest in the Texas Royalty properties to Riverhill Energy in
February 1997. This amount was included in the October 15, 1998
distribution to Unit holders of record on September 30, 1998.
Subsequently, Riverhill Energy advised the Trustee that an overpayment
to the Trust was made in September 1998 with regard to such suspended
funds in the amount of $521,183. Pursuant to the provisions of the
Texas Royalty Net Overriding Conveyance dated effective November 1,
1980, Riverhill Energy had offset such overpayment against royalty
income attributable to the Texas Royalty properties for the month of
October 1998 leaving a net amount due as a result of such overpayment
of $172,648. Such amount was recovered from future net proceeds
attributable to the underlying Texas Royalty properties before such
properties could again contribute to the Trust royalty income.
Interest income for the quarter ended September 30, 1999, was $7,821,
compared to $1,997 during the third quarter of 1998. The increase in
interest income is primarily attributable to an increase in funds
available for investment. General and administrative expenses during
the third quarter of 1999 amounted to $48,635, compared to $50,890
during the third quarter of 1998. The decrease in general and
administrative expenses can be primarily attributed to timing
differences in the receipt and payment of these expenses.
-9-
These transactions resulted in distributable income for the quarter
ended September 30, 1999, of $5,924,721 or $.127115 per Unit of
beneficial interest. Distributions of $.041629, $.037697 and $.047789
per Unit were made to Unit holders of record as of July 30, August 31
and September 30, 1999, respectively. For the third quarter of 1998,
distributable income was $2,357,379 or $.050578 per Unit of beneficial
interest.
Royalty income for the Trust for the third quarter of the calendar
year is associated with actual oil and gas production for the period
May through July 1999 from the properties from which the Trust's net
overriding royalty interests ("Royalties") were carved. Oil and gas
sales attributable to the Royalties and the properties from which the
Royalties were carved are as follows:
<TABLE>
<CAPTION>
Third Quarter
-------------------------
1999 1998
<S> <C> <C>
ROYALTIES:
Oil sales (Bbls) 247,834 97,557
Gas sales (Mcf) 1,007,978 198,019
PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED:
Oil:
Total oil sales (Bbls) 410,051 501,903
Average per day (Bbls) 4,457 5,455
Average price per Bbl $16.14 $11.26
Gas:
Total gas sales (Mcf) 1,749,773 1,886,462
Average per day (Mcf) 19,019 20,505
Average price per Mcf $ 2.18 $ 2.03
</TABLE>
The posted price of oil increased to an average price per barrel of
$16.14 in the third quarter of 1999, compared to $11.26 in the third
quarter of 1998. The Trustee has been advised by BROG that for the
period August 1, 1993, through September 30, 1999, the oil from the
Waddell Ranch properties was being sold under a competitive bid to a
third party. The increase in the average price of gas from $2.03 in
the third quarter of 1998 to $2.18 in the third quarter of 1999 is
primarily attributable to an increase in the spot prices of natural
gas.
Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and
cost (including capital expenditures), the production amounts in the
Royalties section of the above table do not provide a meaningful
comparison. The oil and gas sales from the properties from which the
Royalties are carved decreased slightly for the applicable period in
1999 compared to 1998.
Capital expenditures for drilling, remedial and maintenance activities
on the Waddell Ranch properties during the third quarter of 1999
totaled $60,000 as compared to $4.5 million for the third quarter of
1998. BROG has informed the Trustee that the 1999 capital
expenditures budget has been revised to $1.318 million for the Waddell
Ranch. The total amount of capital expenditures for 1998 was $15.9
million. Through the third quarter of 1999, capital expenditures of
$577,000 have been expended.
The Trustee has been advised that there were no wells completed or in
progress during the three months ended September 30, 1999 on the
Waddell Ranch properties. For the three months ended September 30,
1998, there were 9 gross (3.875 net) wells completed and there were 11
gross (5.125 net) wells in progress.
Lease operating expense and property taxes totaled $2.3 million for
the third quarter of 1999, compared to $3.9 million in the third
quarter of 1998 on the Waddell Ranch properties. This decrease is
primarily attributable to more efficient field operations on the
Waddell Ranch properties.
-10-
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
For the nine months ended September 30, 1999, royalty income received
by the Trust amounted to $11,698,796 compared to royalty income of
$9,258,812 for the nine months ended September 30, 1998. The increase
in royalty income is primarily attributable to an increase in oil and
gas prices during the months of April through October 1999, as well as
a decrease in allocated capital expenditures in the first nine months
of 1999. In the calculation of royalty income for the months of June
through September 1998, costs exceeded revenues for the Waddell Ranch
properties underlying the Waddell Ranch Net Overriding Royalty
Conveyance by $908,510. Such excess costs were recovered from net
proceeds of the underlying Waddell Ranch properties during the first
quarter of 1999 and these properties are again contributing Trust
royalty income. Included in the distributable income for March 1998
was approximately $1.1 million which represented the Trust's portion
of an approximate $1.5 million severance tax refund received from the
State of Texas by BROG, operator of record of the Waddell Ranch
properties in Crane County, Texas.
During the month of September 1998, the Trust received and recorded as
royalty income $1,041,340 representing amounts that the Trustee had
been advised had been previously held in suspense by BROG relating to
the Texas Royalty properties. The Trustee had been advised that these
amounts related to revenues received by BROG prior to conveyance of
its interest in the Texas Royalty properties to Riverhill Energy in
February 1997. This amount was included in the October 15, 1998
distribution to Unit holders of record on September 30, 1998.
Subsequently, Riverhill Energy advised the Trustee that an overpayment
to the Trust was made in September 1998 with regard to such suspended
funds in the amount of $521,183. Pursuant to the provisions of the
Texas Royalty Net Overriding Conveyance dated effective November 1,
1980, Riverhill Energy had offset the overpayment against royalty
income attributable to the Texas Royalty properties for the month of
October 1998 leaving a net amount due as a result of such overpayment
of $172,648. Such amount was recovered from future net proceeds
attributable to the underlying Texas Royalty properties before these
properties could again contribute to the Trust royalty income.
Interest income for the nine months ended September 30, 1999 was
$14,822 compared to $19,910 during the nine months ended September 30,
1998. The decrease in interest income is attributable primarily to a
decrease in funds available for investment. General and
administrative expenses for the nine months ended September 30, 1999
were $308,975. During the nine months ended September 30, 1998,
general and administrative expenses were $323,892. The decrease in
general and administrative expenses is primarily attributable to
timing differences in the receipt and payment of these expenses.
These transactions resulted in distributable income for the nine
months ended September 30, 1999 of $11,404,643 or $.244688 per Unit.
For the nine months ended September 30, 1998, distributable income was
$8,954,830 or $.192128 per Unit.
-11-
Royalty income for the Trust for the period ended September 30, 1999
is associated with actual oil and gas production for the period
November 1998 through July 1999 from the properties from which the
Royalties were carved. Oil and gas production attributable to the
Royalties and the properties from which the Royalties were carved are
as follows:
<TABLE>
<CAPTION>
First Nine Months
-------------------------
1999 1998
<S> <C> <C>
ROYALTIES:
Oil sales (Bbls) 601,755 352,147
Gas sales (Mcf) 2,263,601 1,213,613
PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED:
Oil:
Total oil sales (Bbls) 1,295,313 1,405,613
Average per day (Bbls) 4,745 5,149
Average price per Bbl $12.48 $13.23
Gas:
Total gas sales (Mcf) 5,283,780 5,425,012
Average per day (Mcf) 19,355 19,872
Average price per Mcf $ 1.90 $ 2.22
</TABLE>
The average price of oil decreased during the nine months ended
September 30, 1999, compared to the same period in 1998, $12.48 per
barrel as compared to $13.23 per barrel. The decrease in the average
price of oil is primarily attributable to decreases in the posted
price for oil during the first quarter of 1999. The decrease in the
average price of gas from $2.22 per Mcf for the nine months ended
September 30, 1998 to $1.90 per Mcf for the nine months ended
September 30, 1999 is primarily attributable to a decrease in the spot
prices of natural gas.
Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and
cost (including capital expenditures), the production amounts in the
Royalties section of the above table do not provide a meaningful
comparison. The oil and gas sales from the properties from which the
Royalties are carved decreased slightly for the applicable period of
1999 compared to 1998.
The Trustee has been advised that 15 gross (6.51 net) productive oil
wells on the Waddell Ranch properties were drilled and completed
during the nine months ended September 30, 1999, and that 45 gross
(17.495 net) productive oil wells on the Waddell Ranch properties were
drilled and completed during the nine months ended September 30, 1998.
Capital expenditures for the Waddell Ranch properties for the nine
months ended September 30, 1999 totaled $577,000 compared to $12
million for the same period in 1998. BROG has previously advised the
Trustee that the 1999 capital expenditures budget for the Waddell
Ranch properties has been revised to $1.318 million. The total amount
of capital expenditures for 1998 was $15.9 million.
Lease operating expense and property taxes totaled $7.7 million in
1999 compared to $10.5 million in 1998. The decrease in lease
operating expense is primarily attributable to more efficient field
operations on the Waddell Ranch properties.
-12-
CALCULATION OF ROYALTY INCOME
The Trust's royalty income is computed as a percentage of the net
profit from the operation of the properties in which the Trust owns
net overriding royalty interests. These percentages of net profits
are 75% and 95% in the case of the Waddell Ranch properties and the
Texas Royalty properties, respectively. Royalty income received by
the Trust for the three months ended September 30, 1999 and 1998
respectively, were computed as shown in the table below:
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------
1999 1998
-------------------------- ------------------------------
Waddell Texas Waddell Texas
Ranch Royalty Ranch Royalty
Properties Properties Properties Properties
<S> <C> <C> <C> <C>
Gross proceeds of sales from
properties from which the net
overriding royalties were carved:
Oil proceeds $5,154,870 $1,463,948 $4,404,427 $1,248,627
Gas proceeds 3,320,747 497,155 3,383,255 455,023
Other revenues (a) 1,096,157
---------- --------- --------- ---------
Total 8,475,617 1,961,103 7,787,682 2,799,807
---------- --------- --------- ---------
Less:
Severance tax:
Oil 175,363 49,343 133,024 45,800
Gas 124,283 25,620 139,310 25,965
Lease operating expense and
property tax:
Oil and gas 2,299,375 180,270 3,679,622 195,124
Capital expenditures 59,892 4,519,057
Other expense 23,427
--------- --------- --------- -------
Total 2,682,340 255,233 8,471,013 266,889
--------- --------- --------- -------
Net profits 5,793,277 1,705,870 (683,331) 2,532,918
Net overriding royalty interests 75% 95% 75% 95%
--------- --------- -------- ---------
4,344,958 1,620,577 (512,498) 2,406,272
Less: excess cost over revenues (b) 512,498
--------- --------- --------- ----------
Royalty income $4,344,958 $1,620,577 $ $2,406,272
========== ========== ========== ==========
<FN>
-13-
(a) The Trustee has been advised that in September 1998, Riverhill
Energy received $1,096,157 representing amounts that had been
previously held in suspense by BROG relating to the Texas Royalty
properties. The Trustee has been further advised that these
amounts relate to revenues received by BROG prior to conveyance of
its interest in the Texas Royalty properties to Riverhill Energy
in February 1998.
(b) In calculating Trust royalty income for the months of July through
September 1998, costs exceeded revenues by $512,498 for the
Waddell Ranch properties underlying the Waddell Ranch Net
Overriding Royalty Conveyance, dated November 1, 1980. Excess
costs from one conveyance cannot reduce royalty income computed
under another conveyance. Such excess costs were recovered from
net proceeds of the underlying Waddell Ranch properties during the
first quarter of 1999 and these properties are again contributing
trust royalty income.
</FN>
</TABLE>
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-14-
PART II - OTHER INFORMATION
Items 1 through 4.
Not applicable
Item 5 Other Information
The Trustee has received a copy of a Schedule 13D filed
August 6, 1999 with the Securities and Exchange Commission and
Amendment 1 to Schedule 13D filed October 5, 1999 with the
Securities and Exchange Commission, on behalf of Alpine
Capital L.P., a Texas limited partnership, Robert W. Bruce
III, Algenpar, Inc., a Texas corporation, and J. Taylor
Crandall.
As previously reported, the above-referenced Schedule 13D
reported Alpine Capital, L.P.'s ownership of 2,409,000 Units
of Beneficial Interest of the Trust ("Units"), which
constituted approximately 5.2% of the outstanding Units. The
source of funds for such acquisition, $11,729,410.84, was
reported to be working capital of Alpine Capital, L.P. It was
further reported that Alpine Capital, L.P. acquired 347,200 of
such Units between June 8, 1999 and August 6, 1999, in open
market transactions on the New York Stock Exchange.
Amendment 1 to Schedule 13D ("Amendment") referenced above
amends such Schedule 13D to report the acquisition by Alpine
Capital L.P. of an additional 509,700 Units between August 9,
1999 and October 1, 1999, in open market transactions on the
New York Stock Exchange. The Amendment reported Alpine
Capital, L.P.'s ownership of a total of 2,918,700 Units
(2,409,000 Units which had been previously reported plus the
509,700 Units that had been acquired since the original filing
of such Schedule 13D), which constitutes approximately 6.3% of
the outstanding Units. The source of funds for such
acquisition of the 2,918,700 Units, $14,536,788.27, was
reported to be working capital of Alpine Capital, L.P.
It was also reported that Alpine Capital, L.P., acting through
its two general partners identified below, has the sole power
to vote or to direct the vote and to dispose or to direct the
disposition of such Units. It is reported that such Units
were acquired and continue to be held for investment purposes.
It is additionally reported in such Schedule 13D that Robert
W. Bruce, III and Algenpar, Inc. are the two general partners
of Alpine Capital, L.P. and that J. Taylor Crandall is the
President and sole stockholder of Algenpar, Inc. and because
of such relationships may be deemed to be beneficial owners of
the Units acquired by Alpine Capital, L.P. As the general
partners of Alpine Capital, L.P., it is reported that Robert
W. Bruce, III and Algenpar, Inc. have shared power to vote or
to direct the vote and to dispose or to direct the disposition
of such Units. As the President and sole stockholder of
Algenpar Inc., it is reported that J. Taylor Crandall has
shared power to vote or to direct the vote and to dispose or
to direct the disposition of such Units.
The Trustee has also received a copy of a Schedule 13G filed
July 12, 1999 with the Securities and Exchange Commission, on
behalf of McMorgan & Company, an investment adviser registered
under the Investment Advisers Act of 1940, Thomas Allan
Morton, and Terry Allen O'Toole.
Such Schedule 13G reports that McMorgan & Company, Thomas
Allan Morton, and Terry Allen O'Toole have beneficial
ownership of 5,000,000 Units or approximately 10.73% of the
outstanding Units. It is reported that McMorgan & Company,
Thomas Allan Morton, and Terry Allen O'Toole have sole voting
and sole dispositive power with regard to such 5,000,000
Units. Messrs. Morton and O'Toole are filing in their
capacities as control persons of McMorgan & Company and
disclaim beneficial ownership to the Units involved in such
Schedule 13G.
-15-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4)(a) Permian Basin Royalty Trust Indenture dated November
3, 1980, between Southland Royalty Company (now
Burlington Resources Oil & Gas Company) and The
First National Bank of Fort Worth (now Bank of
America, N.A.), as Trustee, heretofore filed as
Exhibit (4)(a) to the Trust's Annual Report on Form
10-K to the Securities and Exchange Commission for
the fiscal year ended December 31, 1980 is
incorporated herein by reference.
(4)(b) Net Overriding Royalty Conveyance (Permian Basin
Royalty Trust) from Southland Royalty Company (now
Burlington Resources Oil & Gas Company) to The First
National Bank of Fort Worth (now Bank of America,
N.A.), as Trustee, dated November 3, 1980 (without
Schedules), heretofore filed as Exhibit (4)(b) to
the Trust's Annual Report on Form 10-K to the
Securities and Exchange Commission for the fiscal
year ended December 31, 1980 is incorporated herein
by reference.
(4)(c) Net Overriding Royalty Conveyance (Permian Basin
Royalty Trust - Waddell Ranch) from Southland
Royalty Company (now Burlington Resources Oil & Gas
Company) to The First National Bank of Fort Worth
(now Bank of America, N.A.), as Trustee, dated
November 3, 1980 (without Schedules), heretofore
filed as Exhibit (4)(c) to the Trust's Annual Report
on Form 10-K to the Securities and Exchange
Commission for the fiscal year ended December 31,
1980 is incorporated herein by reference.
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1999, there was one
report on Form 8-K filed by the Trust. In such Form 8-K,
the Trustee reported that the Trustee legally changed its
name from NationsBank, N.A. to Bank of America, N.A. On
July 23, 1999, Bank of America, N.A. (formerly known as
NationsBank, N.A.) merged with and into Bank of America
NT&SA, with the resulting entity being called Bank of
America, N.A. As a result, immediately following the close
of business on July 23, 1999, the remaining legal entity is
Bank of America, N.A. As a result of such merger, the
Trustee of the Trust is Bank of America, N.A., successor by
merger to NationsBank, N.A.
-16-
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.
BANK OF AMERICA, N.A.
TRUSTEE FOR THE
PERMIAN BASIN ROYALTY TRUST
By /s/ Eric F. Hyden
-----------------------------
Eric F. Hyden
Vice President
Date: November 12, 1999
(The Trust has no directors or executive officers.)
-17-
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
(4)(a) Permian Basin Royalty Trust Indenture dated
November 3, 1980, between Southland Royalty
Company (now Burlington Resources Oil & Gas
Company) and The First National Bank of Fort
Worth (now Bank of America, N.A.), as
Trustee, heretofore filed as Exhibit (4)(a)
to the Trust's Annual Report on Form 10-K to
the Securities and Exchange Commission for
the fiscal year ended December 31, 1980 is
incorporated herein by reference.*
(b) Net Overriding Royalty Conveyance (Permian
Basin Royalty Trust) from Southland Royalty
Company (now Burlington Resources Oil & Gas
Company) to The First National Bank of Fort
Worth (now Bank of America, N.A.), as
Trustee, dated November 3, 1980 (without
Schedules), heretofore filed as Exhibit
(4)(b) to the Trust's Annual Report on Form
10-K to the Securities and Exchange
Commission for the fiscal year ended
December 31, 1980 is incorporated herein by
reference.*
(c) Net Overriding Royalty Conveyance (Permian
Basin Royalty Trust - Waddell Ranch) from
Southland Royalty Company (now Burlington
Resources Oil & Gas Company) to The First
National Bank of Fort Worth (now Bank of
America, N.A.), as Trustee, dated November
3, 1980 (without Schedules), heretofore
filed as Exhibit (4)(c) to the Trust's
Annual Report on Form 10-K to the Securities
and Exchange Commission for the fiscal year
ended December 31, 1980 is incorporated
herein by reference. *
(27) Financial Data Schedule **
* A copy of this Exhibit is available to any Unit holder, at the
actual cost of reproduction, upon written request to the Trustee,
Bank of America, N.A., P.O. Box 1317, Fort Worth, Texas 76101.
** Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS OF
PERMIAN BASIN ROYALTY TRUST AS OF SEPTEMBER 30, 1999, AND THE RELATED CONDENSED
STATEMENTS OF DISTRIBUTABLE INCOME AND CHANGES IN TRUST CORPUS FOR THE
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $2,227,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $2,227,400
<PP&E> $10,975,216
<DEPRECIATION> $7,964,508
<TOTAL-ASSETS> $5,238,108
<CURRENT-LIABILITIES> $2,227,400
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> $3,010,708
<TOTAL-LIABILITY-AND-EQUITY> $5,238,108
<SALES> 0
<TOTAL-REVENUES> $11,713,618
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> $308,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $11,404,643
<INCOME-TAX> 0
<INCOME-CONTINUING> $11,404,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $11,404,643
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
