<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8518
LL&E ROYALTY TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 76-6007940
(State or other jurisdiction of (I.R.S. Employer
incorporation Identification No.)
or organization)
TEXAS COMMERCE BANK NATIONAL ASSOCIATION 77002
CORPORATE TRUST DIVISION (Zip Code)
712 MAIN STREET
HOUSTON, TEXAS
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (713) 216-6369
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 ______
At November 10, 1997, 18,991,304 Units of Beneficial Interest in the
registrant were outstanding.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Presentation of Financial Information.................. 2
Statements of Cash Earnings and Distributions.......... 3
Statements of Assets, Liabilities and Trust Corpus..... 3
Statements of Changes in Trust Corpus.................. 3
Notes to Financial Statements.......................... 4
Independent Auditors' Review Report.................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................. 14
Signature................................................... 15
</TABLE>
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<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LL&E ROYALTY TRUST
PRESENTATION OF FINANCIAL INFORMATION
The accompanying unaudited financial statements of LL&E Royalty Trust
(Trust) have been prepared in accordance with the instructions to Form 10-Q. The
financial statements were prepared on the basis of cash receipts and
disbursements and are not intended to be a presentation in conformity with
generally accepted accounting principles. The information reflects all
adjustments which, in the opinion of the Trustee, are necessary for a fair
presentation of the results for the interim periods presented. The financial
information should be read in conjunction with the financial statements and
notes thereto included in the Trust's Annual Report on Form 10-K for the year
ended December 31, 1996. The cash earnings and distributions for the nine months
ended September 30, 1997 are not necessarily indicative of the results to be
expected for the year 1997.
The September 30, 1997 and 1996 financial statements included in this
filing on Form 10-Q have been reviewed by KPMG Peat Marwick LLP, independent
auditors, in accordance with established professional standards and procedures
for such a review. The report of KPMG Peat Marwick LLP commenting upon their
review is included herein.
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LL&E ROYALTY TRUST
STATEMENTS OF CASH EARNINGS AND DISTRIBUTIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Royalty revenues............................ $ 2,274,909 $ 4,213,238 $10,166,685 $13,351,226
Trust administrative expenses............... (125,294) (119,312) (428,859) (414,267)
----------- ----------- ----------- -----------
Cash earnings............................... 2,149,615 4,093,926 9,737,826 12,936,959
Changes in undistributed cash............... (16,881) (16,485) (4,746) (4,046)
----------- ----------- ----------- -----------
Cash distributions.......................... $ 2,132,734 $ 4,077,441 $ 9,733,080 $12,932,913
=========== =========== =========== ===========
Cash distributions per Unit................. $ .1123 $ .2147 $ .5125 $ .6810
=========== =========== =========== ===========
Units outstanding........................... 18,991,304 18,991,304 18,991,304 18,991,304
=========== =========== =========== ===========
</TABLE>
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ 21,289 $ 16,543
Net overriding royalty interests in productive oil and gas
properties and 3% royalty interests in fee lands (notes 2,
3 and 5).................................................. 76,282,000 83,490,000
Less accumulated amortization (note 3)...................... (72,654,000) (79,074,000)
------------ ------------
Total assets...................................... $ 3,649,289 $ 4,432,543
============ ============
LIABILITIES AND TRUST CORPUS
Trust Corpus (18,991,304 Units of Beneficial Interest
authorized, issued and outstanding)....................... $ 3,649,289 $ 4,432,543
Contingencies (note 4)
------------ ------------
Total liabilities and trust corpus................ $ 3,649,289 $ 4,432,543
============ ============
</TABLE>
STATEMENTS OF CHANGES IN TRUST CORPUS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Trust Corpus, beginning of period (note 3).................. $ 4,432,543 $ 5,851,902
Cash earnings............................................... 9,737,826 12,936,959
Cash distributions.......................................... (9,733,080) (12,932,913)
Amortization of royalty interest (note 3)................... (788,000) (1,483,000)
------------ ------------
Trust Corpus, end of period................................. $ 3,649,289 $ 4,372,948
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) FORMATION OF THE TRUST
On June 28, 1983, The Louisiana Land and Exploration Company (herein
Working Interest Owner or Company) created LL&E Royalty Trust (Trust) and
distributed Units of Beneficial Interest (Units) in the Trust to the holders of
record of capital stock of the Company on the basis of one Unit for each two
shares of capital stock held on June 22, 1983. As of October 22, 1997, the
Working Interest Owner is a wholly owned subsidiary of Burlington Resources Inc.
The Working Interest Owner has advised the Trust that this merger should have no
significant effects on the Trust, although the precise nature of any effects
cannot be predicted or quantified at this time.
Upon creation of the Trust, the Company conveyed to the Trust (a) net
overriding royalty interests (Overriding Royalties), which are equivalent to net
profits interests, in certain productive oil and gas properties located in
Alabama, Florida, Texas and in federal waters offshore Louisiana (Productive
Properties) and (b) 3% royalty interests (Fee Lands Royalties) in certain of the
Company's then unleased, undeveloped south Louisiana fee lands (Fee Lands). The
Overriding Royalties and the Fee Lands Royalties are referred to collectively as
the "Royalties". Title to the Royalties is held by a partnership (Partnership)
of which the Trust and the Company are the only partners, holding 99% and 1%
interests, respectively.
The Trust is passive, with Texas Commerce Bank National Association, as
Trustee, having only such powers as are necessary for the collection and
distribution of revenues resulting from the Royalties, the payment of Trust
liabilities and the conservation and protection of the Trust estate. The Units
are listed on the New York Stock Exchange.
(2) NET OVERRIDING ROYALTY INTERESTS AND FEE LANDS ROYALTIES
The instruments conveying the Overriding Royalties generally provide that
the Working Interest Owner or any successor working interest owner will
calculate and pay to the Trust each month an amount equal to various percentages
of the Net Proceeds (as defined) from the Productive Properties. For purposes of
computing Net Proceeds, the Productive Properties have been grouped
geographically into four groups of leases, each of which has been defined as a
separate "Property". Generally, Net Proceeds will be computed on a
Property-by-Property basis and will consist of the aggregate proceeds to the
Working Interest Owner or any successor working interest owner from the sale of
oil, gas and other hydrocarbons from each of the Productive Properties less: (a)
all direct costs, charges, and expenses incurred by the Working Interest Owner
in exploration, production, development and other operations on the Productive
Properties (including secondary and tertiary recovery operations), including
abandonment costs; (b) all applicable taxes, including severance, ad valorem and
windfall profits taxes, but excluding income taxes except as described in note 4
below; (c) all operating charges directly associated with the Productive
Properties; (d) an allowance for costs if costs and
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
expenses for any Productive Property have exceeded proceeds of production from
such Productive Property; and (e) charges for certain overhead expenses.
The Fee Lands Royalties consist of royalty interests equal to a 3% interest
in the future gross oil, gas, and other hydrocarbon production, if any, from
each of the Fee Lands, unburdened by the expense of drilling, completion,
development, operating and other costs incident to production. In June 1993,
pursuant to applicable law, the Fee Lands Royalties terminated as to all tracts
not then held by production or maintained by production from other tracts.
Consequently, at September 30, 1997, the Fee Lands consisted of approximately
35,000 gross acres.
(3) BASIS OF PRESENTATION
The financial statements of the Trust are prepared on the following basis:
(a) Royalties are recorded on a cash basis and are generally received
by the Trustee in the third month following the month of production of oil
and gas attributable to the Trust's interest.
(b) Trust expenses, which include accounting, engineering, legal and
other professional fees, Trustee's fees and out-of-pocket expenses, are
recorded on a cash basis.
(c) Amortization of the net overriding royalty interests in productive
oil and gas properties and the 3% royalty interest in Fee Lands, which is
calculated on a unit-of-production basis, is charged directly to the Trust
corpus since the amount does not affect cash earnings.
(d) The initial carrying value of the Trust's royalty interests in oil
and gas properties represents the Company's cost on a successful efforts
basis (net of accumulated depreciation, depletion and amortization) at June
28, 1983 applicable to the interest in the properties transferred to the
Trust. Information regarding the calculation of the amount of such cost was
supplied by the Company to the Trustee. The initial carrying value and
related accumulated amortization has been reduced by the amounts attributed
to the Fort Worth Basin property which was sold in January 1997. Proceeds
from the sale were included in the cash distribution in April 1997. The
unamortized balance at September 30, 1997, is not necessarily indicative of
the fair market value of the interests held by the Trust.
The preparation of the financial statements requires 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
While these statements differ from financial statements prepared in
accordance with generally accepted accounting principles, the cash basis of
reporting revenues and expenses is considered to be the most
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<PAGE> 7
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
meaningful because monthly distributions to the Unit holders are based on net
cash receipts. The financial information furnished herein should be read in
conjunction with the financial statements and notes thereto included in the
Trust's Annual Report on Form 10-K for the year ended December 31, 1996.
(4) FEDERAL INCOME TAX MATTERS
In May and June 1983, the Company applied to the Internal Revenue Service
(IRS) for certain rulings, including the following: (a) the Trust will be
classified for federal income tax purposes as a trust and not as an association
taxable as a corporation, (b) the Trust would be characterized as a "grantor"
trust as to the Unit holders and not as a "simple" or "complex" trust (a
"non-grantor" trust), (c) the Partnership will be classified as a partnership
and not as an association taxable as a corporation, (d) the Company will not
recognize gain or loss upon the transfer of the Royalties to the Trust or upon
the distribution of the Units to its stockholders, (e) each Royalty will be
considered an economic interest in oil and gas in place, and each Overriding
Royalty will constitute a single property within the meaning of Section 614(a)
of the Internal Revenue Code, (f) the steps taken to create the Trust and the
Partnership and to distribute the Units will be viewed for federal income tax
purposes as a distribution of the Royalties by the Company to its stockholders,
followed by the contribution of the Royalties by the stockholders to the
Partnership in exchange for interests therein, which in turn was followed by the
contribution by the stockholders of the interests in the Partnership to the
Trust in exchange for Units, and (g) the transfer of a Unit of the Trust will be
considered for federal income tax purposes to be the transfer of the
proportionate part of the Partnership interest attributable to such Unit.
Subsequent to the distribution of the Units, the IRS ruled favorably on all
requested rulings except (d). Because the rulings were issued after the
distribution of the Units, however, the rulings could be revoked by the IRS if
it changes its position on the matters they address. If the IRS changed its
position on these issues, challenged the Trust and the Unit holders and was
successful, the result could be adverse. The Company withdrew its request for
the ruling described in (d), and the Company and the IRS subsequently litigated
the issue. The Tax Court rendered an opinion favorable to the Company, which has
become final.
These financial statements are prepared on the basis that the Trust will be
treated as a "grantor" trust and that the Partnership will be treated as a
partnership for federal income tax purposes. Accordingly, no income taxes are
provided in the financial statements.
(5) DISMANTLEMENT OF PLATFORMS AT OFFSHORE LOUISIANA
The conveyances creating the Overriding Royalties permit the Company, under
certain circumstances, to establish an escrow for various matters. From the
August 1991 distribution through the August 1992 distribution the Company
escrowed funds from Offshore Louisiana in connection with anticipated platform
dismantlement costs of Offshore Louisiana. The Company ceased escrowing for
dismantlement costs at
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<PAGE> 8
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
Offshore Louisiana beginning with the September 1992 distribution because it had
fully escrowed the amount currently estimated to be ultimately incurred for
dismantlement of platforms located on this property. The total cumulative
Offshore Louisiana escrow balance as of September 30, 1997 was approximately
$2,300,000, 90% of which was otherwise distributable to the Trust. The Escrow
amount has been reduced by plug and abandonment costs related to an Offshore
Louisiana property disposed of in July 1997.
The Company has advised the Trustee that it intends to continue to monitor
its estimates of relevant factors in order to evaluate the necessity of
escrowing funds on an ongoing basis, whether in connection with dismantlement
costs or other matters. The Company is under no obligation to give any advance
notice to the Trustee or the Unit holders in the event it determines that
additional funds should be escrowed. If the Company decides to escrow additional
amounts, the Royalties paid to the Trust could be reduced, and the reductions
could be significant.
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<PAGE> 9
INDEPENDENT AUDITORS' REVIEW REPORT
Texas Commerce Bank National Association, Trustee
and the Unit Holders of LL&E Royalty Trust:
We have reviewed the accompanying statement of assets, liabilities and
Trust corpus of LL&E Royalty Trust (Trust) as of September 30, 1997, and the
related statements of cash earnings and distributions for the three-month and
nine-month periods ended September 30, 1997 and 1996 and changes in Trust corpus
for the nine-month periods ended September 30, 1997 and 1996. These financial
statements are the responsibility of the Trustee.
We conducted our review 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.
As described in Note 3, these financial statements were prepared on the
basis of cash receipts and disbursements and are not intended to be a
presentation in conformity with generally accepted accounting principles.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with the basis of accounting as described in Note 3.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and Trust corpus as of December
31, 1996, and the related statements of cash earnings and distributions and
changes in Trust corpus for the year then ended (not presented herein), and in
our report dated March 7, 1997, we expressed an unqualified opinion on those
financial statements which were prepared on the basis of accounting described in
Note 3.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
October 17, 1997
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-Q, including without
limitation the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," are forward-looking statements.
Although the Working Interest Owner has advised the Trust that they believe that
the expectations reflected in the forward-looking statements contained herein
are reasonable, no assurance can be given that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from expectations ("Cautionary Statements") are disclosed in this
Form 10-Q and in the Trust's Form 10-K, including without limitation in
conjunction with the forward-looking statements included in this Form 10-Q. All
subsequent written and oral forward-looking statements attributable to the Trust
or persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
The unaudited data included in the financial statements and notes thereto
in Item 1. are an integral part of this discussion and analysis and should be
read in conjunction herewith. The information contained herein regarding
operations and exploration and development activities on the properties burdened
by the Royalties, and certain other matters, has been furnished by the Working
Interest Owner.
LIQUIDITY AND CAPITAL RESOURCES
As stipulated in the Trust Agreement, the Trust is intended to be passive,
and the Trustee's activities are limited to the receipt of revenues attributable
to the Royalties, which revenues are to be distributed currently (after payment
of or provision for Trust expenses and liabilities) to the owners of the Units.
The Trust has no source of liquidity or capital resources other than the
revenue, if any, attributable to the Royalties.
The conveyances creating the Overriding Royalties permit the Working
Interest Owner, under certain circumstances, to establish escrows for various
matters. The Working Interest Owner has escrowed approximately $2,300,000 from
the Offshore Louisiana property, 90% of which would otherwise have been
distributable to the Trust, in preparation for anticipated platform
dismantlement costs. The Working Interest Owner has advised the Trustee that
under the terms of the conveyances it is permitted to escrow funds from the
Offshore Louisiana property at present and that it intends to continue
monitoring its estimates of relevant factors in order to continually evaluate
the necessity of escrowing funds on an ongoing basis. The Working Interest Owner
is under no obligation to give any advance notice to the Trustee or the Unit
holders in the event it determines that additional funds should be escrowed. If
the Working Interest Owner begins to escrow additional funds, the Royalties paid
to the Trust would be reduced, and the reductions could be significant.
RESULTS OF OPERATIONS
Revenues are generally received in the third month following the month of
production of oil and gas attributable to the Trust's interest. Both revenues
and Trust expenses are recorded on a cash basis. Accordingly, distributions to
Unit holders for the three-month and nine-month periods ended September 30,
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<PAGE> 11
1997 and 1996 (the 1997 and 1996 "Third Quarter" and "First Nine Months",
respectively) are attributable to the Working Interest Owner's operations during
the periods April through June (the "Three-Month Operating Periods") of 1997 and
1996, respectively, and the periods October 1996 through June 1997 and October
1995 through June 1996 (the 1997 and 1996 "Nine-Month Operating Periods",
respectively).
Distributions to Unit holders for the 1997 and 1996 Third Quarters amounted
to $2,132,734 ($0.1123 per Unit) and $4,077,441 ($0.2147 per Unit),
respectively. During these periods, the Trust received cash of $2,274,909 and
$4,213,238, respectively, from the Working Interest Owner with respect to the
Royalties from the Properties.
The monthly per Unit distributions during the 1997 and 1996 Third Quarters
were as follows:
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
July.................................................... $.0278 $.0920
August.................................................. .0349 .0731
September............................................... .0496 .0496
------ ------
$.1123 $.2147
====== ======
</TABLE>
Distributions to Unit holders for the First Nine Months of 1997 and 1996
amounted to $9,733,080 ($.5125 per Unit) and $12,932,913 ($.6810 per Unit),
respectively. During these periods, the Trust received cash of $10,166,685 and
$13,351,226, respectively, from the Working Interest Owner with respect to the
Royalties from the Properties.
The following unaudited schedules provide summaries of the Working Interest
Owner's calculation of the Net Proceeds from the Properties and the Royalties
paid to the Trust for the Third Quarter and First Nine Months of 1997:
THIRD QUARTER 1997
<TABLE>
<CAPTION>
SOUTH OFFSHORE FORT WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Liquids...................... $ 5,945,790 $1,695,367 $ 407,998 $ 0 $ 8,049,155
Natural Gas.................. 373,500 1,732,269 1,410,410 0 3,516,179
----------- ---------- ---------- --------- -----------
6,319,290 3,427,636 1,818,408 0 11,565,334
Production costs and
expenses..................... (3,158,249) (179,995) (202,426) 0 (3,540,670)
Capital expenditures........... (1,206,325) (1,206,443) (188,542) 0 (2,601,310)
----------- ---------- ---------- --------- -----------
Net Proceeds................... $ 1,954,716 $2,041,198 $1,427,440 $ 0 $ 5,423,354
=========== ========== ========== ========= ===========
Overriding Royalties paid to
the Trust(1)................. $ 977,358 $1,020,599 $ 248,666 $ 0 $ 2,246,623
=========== ========== ========== =========
Fee Lands Royalties................................................................ 28,286
-----------
Royalties paid to the Trust........................................................ $ 2,274,909
===========
</TABLE>
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<PAGE> 12
FIRST NINE MONTHS 1997
<TABLE>
<CAPTION>
SOUTH OFFSHORE FORT WORTH
JAY FIELD PASS 89 LOUISIANA BASIN(2) TOTAL
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Liquids................... $21,562,968 $ 5,327,821 $ 1,551,412 $ 0 $ 28,442,201
Natural Gas............... 1,944,931 6,399,212 4,384,520 0 12,728,663
Fort Worth Basin
proceeds............... 0 0 0 65,000 65,000
----------- ----------- ----------- --------- ------------
23,507,899 11,727,033 5,935,932 65,000 41,235,864
Production costs and
expenses.................. (11,164,398) (209,210) (1,089,615) 0 (12,463,223)
Capital expenditures........ (4,402,280) (2,437,715) (3,144,883) 0 (9,984,878)
----------- ----------- ----------- --------- ------------
Net Proceeds................ $ 7,941,221 $ 9,080,108 $ 1,701,434 $ 65,000 $ 18,787,763
=========== =========== =========== ========= ============
Overriding Royalties paid to
the Trust(1).............. $ 3,970,610 $ 4,540,054 $ 1,479,920 $ 46,116 $ 10,036,700
=========== =========== =========== =========
Fee Lands Royalties............................................................... 129,985
------------
Royalties paid to the Trust....................................................... $ 10,166,685
============
</TABLE>
- ------------
(1) As a result of excess production costs being incurred in one monthly
operating period and then being recovered in a subsequent monthly operating
period(s), the overriding royalties paid to the Trust may not agree to the
Trust's royalty interest in Net Proceeds.
(2) On January 31, 1997, the Working Interest Owner sold all of the Fort Worth
Basin Properties with an effective date of October 1, 1996 for $65,000, and
the Trust's Interests in such properties terminated on that date. The
Trust's interests in the proceeds of the sale less excess production costs
recoverable as of September 30, 1996 were distributed to the Trust in April
1997.
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<PAGE> 13
The following unaudited schedules provide summaries of the Working Interest
Owner's calculation of the Net Proceeds from the Properties and the Royalties
paid to the Trust for the Third Quarter and First Nine Months of 1996:
THIRD QUARTER 1996
<TABLE>
<CAPTION>
SOUTH OFFSHORE FORT WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Liquids....................... $ 7,302,308 $1,548,301 $ 369,388 $ 0 $ 9,219,997
Natural Gas................... 629,911 2,657,137 1,343,011 24,593 4,654,652
----------- ---------- ---------- -------- -----------
7,932,219 4,205,438 1,712,399 24,593 13,874,649
Production costs and expenses... (3,487,280) (376,858) (409,924) (22,776) (4,296,838)
Capital expenditures............ (1,314,992) (127,215) (493,005) 0 (1,935,212)
----------- ---------- ---------- -------- -----------
Net Proceeds.................... $ 3,129,947 $3,701,365 $ 809,470 $ 1,817 $ 7,642,599
=========== ========== ========== ======== ===========
Overriding Royalties paid to the
Trust(1)...................... $ 1,564,974 $1,850,683 $ 728,522 $ 0 $ 4,144,179
=========== ========== ========== ========
Fee Lands Royalties................................................................. 69,059
-----------
Royalties paid to the Trust......................................................... $ 4,213,238
===========
</TABLE>
FIRST NINE MONTHS 1996
<TABLE>
<CAPTION>
SOUTH OFFSHORE FORT WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Liquids.................... $ 18,475,219 $ 5,390,750 $ 1,359,909 $ 0 $ 25,225,878
Natural Gas................ 1,853,233 8,729,319 4,395,880 71,893 15,050,325
------------ ----------- ----------- -------- ------------
20,328,452 14,120,069 5,755,789 71,893 40,276,203
Production costs and expenses... (10,300,987) (1,246,162) (1,244,521) (69,181) (12,860,851)
Capital expenditures......... (3,753,204) (257,078) (361,982) 0 (4,372,264)
------------ ----------- ----------- -------- ------------
Net Proceeds................. $ 6,274,261 $12,616,829 $ 4,149,286 $ 2,712 $ 23,043,088
============ =========== =========== ======== ============
Overriding Royalties paid to
the Trust(1)............... $ 3,137,131 $ 6,308,415 $ 3,734,357 $ 0 $ 13,179,903
============ =========== =========== ========
Fee Lands Royalties................................................................. 176,273
------------
13,356,176
Partnership expenses................................................................ (4,950)
------------
Net payments to the Trust........................................................... $ 13,351,226
============
</TABLE>
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<PAGE> 14
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(1) As a result of excess production costs being incurred in one monthly
operating period and then being recovered in a subsequent monthly operating
period, the overriding royalties paid to the Trust may not agree to the
Trust's royalty interest in Net Proceeds. At Fort Worth Basin approximately
$10,000 of excess production costs were recoverable from future revenues as
of September 30, 1996.
The following unaudited schedule provides a summary of the Working Interest
Owner's calculation of the Net Proceeds from the Properties and the Royalties
paid to the Trust for the Third Quarter and First Nine Months of 1997 and 1996:
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Proceeds:
Revenues.............................. $11,565,334 $13,874,649 $ 41,235,864 $ 40,276,203
Production costs and expenses......... (3,540,670) (4,296,838) (12,463,223) (12,860,851)
Capital expenditures.................. (2,601,310) (1,935,212) (9,984,878) (4,372,264)
----------- ----------- ------------ ------------
Net Proceeds.......................... $ 5,423,354 $ 7,642,599 $ 18,787,763 $ 23,043,088
=========== =========== ============ ============
Royalties paid to the Trust:
Overriding Royalties.................. $ 2,246,623 $ 4,144,179 $ 10,036,700 $ 13,179,903
Fee Lands Royalties................... 28,286 69,059 129,985 176,273
----------- ----------- ------------ ------------
2,274,909 4,213,238 10,166,685 13,356,176
Partnership expenses.................. 0 0 0 (4,950)
----------- ----------- ------------ ------------
Royalties paid to the Trust........... $ 2,274,909 $ 4,213,238 $ 10,166,685 $ 13,351,226
=========== =========== ============ ============
</TABLE>
Revenues of the Working Interest Owner with respect to the Productive
Properties decreased 17% in the 1997 Three-Month Operating Period and increased
2% in the 1997 Nine-Month Operating Period. The decrease in revenues for the
1997 Three-Month Operating Period was primarily due to lower average prices and
declines in liquids production at Jay Field and natural gas deliveries at South
Pass 89. In the Nine-Month Operating Period, higher average prices along with
the proceeds from the sale of Fort Worth Basin received in the 1997 Second
Quarter contributed to the increase in revenues.
Average crude oil, natural gas liquids and natural gas prices attributable
to the Productive Properties received by the Working Interest Owner in the 1997
Three-Month Operating Period were $18.62, $10.35 and $2.06, respectively. In the
comparable 1996 period average crude oil, natural gas liquids and natural gas
prices were $20.72, $11.14 and $2.70, respectively. In the 1997 Nine-Month
Operating Period average crude oil, natural gas liquids and natural gas prices
were $21.36, $13.61 and $2.66, respectively. In the 1996 Nine-Month Operating
Period average crude oil, natural gas liquids and natural gas prices were
$18.84, $9.68 and $2.62, respectively.
-13-
<PAGE> 15
Production costs and expenses incurred by the Working Interest Owner on the
Productive Properties decreased 18% and 3% in the 1997 Three-Month Operating
Period and the 1997 Nine-Month Operating Period, respectively, primarily due to
lower operating expenses at South Pass 89, lower repair and maintenance costs at
Jay Field and South Pass 89, and lower workover costs at Jay Field. The benefit
of these lower costs was partially offset by higher operating expenses at Jay
Field and Offshore Louisiana.
Capital expenditures increased 34% and 128% in the 1997 Three-Month
Operating Period and the 1997 Nine-Month Operating Period, respectively, due to
higher drilling costs at South Pass 89 in both periods and Offshore Louisiana in
the 1997 Nine-Month Operating Period. Higher facilities expenditures at Jay
Field, South Pass 89 and Offshore Louisiana also contributed to the increase in
capital expenditures in both periods.
Imputed production attributable to the Trust is calculated by multiplying
the gross production volumes attributable to the Productive Properties by the
ratio of the net overriding royalties paid to the Trust to the gross revenues
attributable to the Productive Properties. Imputed liquids production was 88,173
barrels for the 1997 Three-Month Operating Period and 121,884 barrels for the
1996 Three-Month Operating Period. Imputed natural gas production was 359,763
thousand cubic feet and 681,251 thousand cubic feet for the respective periods.
During the First Nine Months of 1997, one successful gas well was completed
at Offshore Louisiana and one oil well was drilled at South Pass 89. No drilling
activities occurred on the Fee Lands.
As described in more detail in the Trust's Annual Report on Form 10-K for
the year ended December 31, 1996, under Louisiana law, mineral royalties
generally terminate, in the absence of production, after the lapse of ten
consecutive years from the date of conveyance. Consequently, substantially all
of the Trust's royalty interest in the original Fee Lands acreage terminated in
June 1993. The Trust never received any revenues from the tracts as to which the
Fee Lands Royalties terminated and such termination did not affect tracts from
which the Trust is receiving revenues. However, the Trust will not be entitled
to receive any revenues in the future from the tracts as to which the Fee Lands
Royalties terminated. At September 30, 1997, the Fee Lands consisted of
approximately 35,000 gross acres in South Louisiana, approximately 5,437 of
which were under lease.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits -- None.
(b) Reports on Form 8-K -- None.
-14-
<PAGE> 16
SIGNATURE
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.
LL&E ROYALTY TRUST
(Registrant)
By: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
Trustee
By: /s/ PETE FOSTER
Pete Foster
Senior Vice President and Trust
Officer
Date: November 10, 1997
NOTE: Because the registrant is a trust without officers or employees, only the
signature of an officer of the Trustee is available and has been provided.
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LL&E
ROYALTY TRUST 1997 THIRD QUARTER REPORT AND FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH 1997 THIRD QUARTER REPORT AND FORM
10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,289
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,289
<PP&E> 76,282
<DEPRECIATION> 72,654
<TOTAL-ASSETS> 3,649,289
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,649,289
<TOTAL-LIABILITY-AND-EQUITY> 3,649,289
<SALES> 10,166,685
<TOTAL-REVENUES> 10,166,685
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 428,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,733,080
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,733,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,733,080
<EPS-PRIMARY> .513
<EPS-DILUTED> .513
</TABLE>
