<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, 2000.
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)
THE CHASE MANHATTAN BANK 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) 216-5447
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, 2000, 18,991,304 Units of Beneficial Interest in the
registrant were outstanding.
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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 Accountants' 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.................. 16
Signature................................................... 17
</TABLE>
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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, 1999. The cash earnings and distributions for the nine months
ended September 30, 2000 are not necessarily indicative of the results to be
expected for the year 2000.
The September 30, 2000 and 1999 financial statements included in this
filing on Form 10-Q have been reviewed by KPMG LLP, independent auditors, in
accordance with established professional standards and procedures for such a
review. The review report of KPMG LLP 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,
------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Royalty revenues............................ $ 2,819,497 $ 284,477 $ 8,095,994 $ 1,729,993
Trust administrative expenses............... (136,692) (125,568) (413,180) (425,413)
----------- ----------- ----------- -----------
Cash earnings............................... 2,682,805 158,909 7,682,814 1,304,580
Changes in undistributed cash............... (6,171) (275) (9,582) (323)
----------- ----------- ----------- -----------
Cash distributions.......................... $ 2,676,634 $ 158,634 $ 7,673,232 $ 1,304,257
=========== =========== =========== ===========
Cash distributions per Unit................. $ .1409 $ .0084 $ .4040 $ .0687
=========== =========== =========== ===========
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,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ 27,383 $ 17,801
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 76,282,000
Less accumulated amortization (note 3)...................... (73,936,000) (73,793,000)
------------ ------------
Total assets...................................... $ 2,373,383 $ 2,506,801
============ ============
LIABILITIES AND TRUST CORPUS
Trust Corpus (18,991,304 Units of Beneficial Interest
authorized, issued and outstanding)....................... $ 2,373,383 $ 2,506,801
------------ ------------
Total liabilities and trust corpus................ $ 2,373,383 $ 2,506,801
============ ============
</TABLE>
STATEMENTS OF CHANGES IN TRUST CORPUS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Trust Corpus, beginning of period (note 3).................. $ 2,506,801 $ 2,584,963
Cash earnings............................................... 7,682,814 1,304,580
Cash distributions.......................................... (7,673,232) (1,304,257)
Amortization of royalty interest (note 3)................... (143,000) (244,000)
----------- -----------
Trust Corpus, end of period................................. $ 2,373,383 $ 2,341,286
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
(1) FORMATION OF THE TRUST
On June 28, 1983, The Louisiana Land and Exploration Company (herein
Working Interest Owner or Company) created the 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. On October 22, 1997, the shareholders of the
Company approved a definitive agreement to merge with Burlington Resources Inc.
("BR"). Effective on that date, the Company became a wholly owned subsidiary of
BR. The merger had no significant effects on the Trust.
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 The Chase Manhattan Bank (the "Trustee")
successor by merger to the Chase Bank of Texas, 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 (NYSE Symbol: LRT).
(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 in the Conveyance of Overriding Royalty
Interests) from the Productive Properties. For purposes of computing Net
Proceeds prior to January 1997, the Productive Properties were grouped
geographically into four groups of leases, each of which has been defined as a
separate Property. In January 1997, the Fort Worth Basin property was sold,
therefore only three groups of leases remain. Generally, Net Proceeds are
computed on a Property-by-Property basis and 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 and ad valorem taxes, but excluding income taxes except as described
in note 4 below; (c) all operating charges directly associated with the
Productive Properties; (d) an
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
SEPTEMBER 30, 2000
allowance for costs if costs and expenses for any Productive Property have
exceeded proceeds of production from such Productive Property in a preceding
month; 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, 2000, 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 unamortized balance at
September 30, 2000, 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 meaningful because
monthly distributions to the Unit holders are based on net cash receipts. The
financial
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
SEPTEMBER 30, 2000
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, 1999.
(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 would 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
became final in 1992.
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
The Working Interest Owner, under the terms of the Trust Conveyances is
permitted to escrow funds from the Productive Properties for estimated future
costs such as dismantlement costs and capital expenditures. According to the
most recent reserve report, included in the Trust's Annual Report and Form 10-K
for the year ended December 31, 1999, the total future dismantlement costs to
the Working Interest Owner are
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
SEPTEMBER 30, 2000
estimated to be $9,600,000 for Jay Field, $2,600,000 for South Pass 89, and
$3,000,000 for the Offshore Louisiana property. The Trust's interests in these
properties are equivalent to 50% of the net proceeds from Jay Field and South
Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana
property.
In February 2000, the Working Interest Owner informed the Trustee that it
has elected at this time not to escrow any additional funds from the Productive
Properties to provide for the Trust's portion of the estimated costs of
dismantling platforms effective with the April 2000 royalty distribution.
The cumulative escrow balance as of September 30, 2000 was approximately
$4,543,000 for the Jay Field property and $2,600,000 for the South Pass 89
property, 50% of which would otherwise have been distributable to the Trust. At
September 30, 2000, the cumulative escrow balance for the Offshore Louisiana
property was $3,000,000, 90% of which would otherwise have been distributable to
the Trust.
The Working Interest Owner has advised the Trustee that under the terms of
the conveyances it is permitted to escrow funds from all of the Productive
Properties and that it intends to continue monitoring its estimates of relevant
factors in order to 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.
(6) CONTINGENCY
In September 1999, Florida's Department of Revenue ("FDR") issued two
Notices of Intent to Make Audit Changes claiming that the Company underpaid
severance taxes on crude oil production from the Jay Field between January 1,
1993 and December 31, 1997. The Company valued crude oil on the basis of sales
at posted prices in the area. The FDR asserted that posted prices did not
reflect the true market value of the production and recalculated taxes using the
value of refined products attributable to Jay Field crude oil. Additionally,
certain treating deductions were disallowed. The total deficiency alleged
(inclusive of penalties and interest through September 13, 1999) amounted to
approximately $5 million of which approximately $3.4 million was applicable to
the Trust. The Company contended that the applicable posted prices were an
accurate measure of the fair market value of crude oil in the field and were in
compliance with Florida's statutory requirements relative to crude oil valuation
for severance tax purposes. The Company informed the Trustee that it also
believed the subject treating charge deductions were proper. Subsequently, FDR
reconsidered its valuation methodology regarding the Company's crude oil
production in the Jay Field between January 1, 1993 and December 31, 1997 and
withdrew its claim for underpayment of severance taxes and associated penalties
and interest, as well as certain treating deductions that were considered
disallowed.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Chase Manhattan Bank, 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, 2000, and the
related statements of cash earnings and distributions for the three-month and
nine-month periods ended September 30, 2000 and 1999 and changes in Trust corpus
for the nine-month periods ended September 30, 2000 and 1999. 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, 1999, 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 20, 2000, we expressed an unqualified opinion on those
financial statements which were prepared on the basis of accounting described in
Note 3.
KPMG LLP
Dallas, Texas
November 10, 2000
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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 it believes 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 Working Interest Owner, under the terms of the Trust Conveyances is
permitted to escrow funds from the Productive Properties for estimated future
costs such as dismantlement costs and capital expenditures. According to the
most recent reserve report, included in the Trust's Annual Report and Form 10-K
for the year ended December 31, 1999, the total future dismantlement costs to
the Working Interest Owner are estimated to be $9,600,000 for Jay Field,
$2,600,000 for South Pass 89, and $3,000,000 for the Offshore Louisiana
property. The Trust's interests in these properties are equivalent to 50% of the
net proceeds from Jay Field and South Pass 89 properties and 90% of the net
proceeds from the Offshore Louisiana property.
In February 2000, the Working Interest Owner informed the Trustee that it
has elected at this time not to escrow any additional funds from the Productive
Properties to provide for the Trust's portion of the estimated costs of
dismantling platforms effective with the April 2000 royalty distribution.
The cumulative escrow balance as of September 30, 2000 was approximately
$4,543,000 for the Jay Field property and $2,600,000 for the South Pass 89
property, 50% of which would otherwise have been distributable to the Trust. At
September 30, 2000, the cumulative escrow balance for the Offshore Louisiana
property was $3,000,000, 90% of which would otherwise have been distributable to
the Trust.
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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, 2000
and 1999 (the 2000 and 1999 "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 2000 and
1999, respectively and the periods October 1999 through June 2000 and October
1998 through June 1999 (the 2000 and 1999 "Nine-Month Operating Periods",
respectively).
Distributions to Unit holders for the 2000 and 1999 Third Quarters amounted
to $2,676,634 ($.1409 per Unit) and $158,634 ($.0084 per Unit), respectively.
During these periods, the Trust received cash of $2,819,497 and $284,477
respectively, from the Working Interest Owner with respect to the Royalties from
the Productive Properties.
The monthly per Unit distributions for the 2000 and 1999 Third Quarters
were as follows:
<TABLE>
<CAPTION>
2000 1999
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July........................................................ $.0343 $.0055
August...................................................... .0502 .0002
September................................................... .0564 .0027
------ ------
$.1409 $.0084
====== ======
</TABLE>
Distributions to Unit holders for the First Nine Months of 2000 and 1999
amounted to $7,673,232 ($.4040 per Unit) and $1,304,257 ($.0687 per Unit),
respectively. During these periods, the Trust received cash of $8,095,994 and
$1,729,993, respectively, from the Working Interest Owner with respect to the
Royalties from the Productive Properties.
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<PAGE> 12
The following unaudited schedules provide summaries of the Working Interest
Owner's calculation of the Net Proceeds from the Productive Properties and the
Royalties paid to the Trust for the Third Quarter and First Nine Months of 2000:
THIRD QUARTER 2000
<TABLE>
<CAPTION>
OFFSHORE
JAY FIELD SOUTH PASS 89 LOUISIANA TOTAL
----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Revenues:
Liquids................................. $ 7,383,248 $ 1,350,889 $ 380,863 $ 9,115,000
Natural gas............................. 290,512 579,455 1,061,690 1,931,657
Special Cost Escrow(1).................. -- -- -- --
----------- ----------- --------- -----------
7,673,760 1,930,344 1,442,553 11,046,657
Production costs and expenses(2).......... (2,771,010) 67,568 (217,104) (2,920,546)
Capital expenditures...................... (1,503,586) 153,827 (1,094,607) (2,444,366)
----------- ----------- --------- -----------
Net Proceeds.............................. $ 3,399,164 2,151,739 $ 130,842 5,681,745
=========== =========== ========= ===========
Overriding Royalties paid to the
Trust(3)................................ $ 1,699,582 $ 1,075,870 $ -- $ 2,775,452
=========== =========== =========
Fee Lands Royalties................................................................ 44,045
-----------
Royalties paid to the Trust........................................................ $ 2,819,497
===========
</TABLE>
FIRST NINE MONTHS 2000
<TABLE>
<CAPTION>
OFFSHORE
JAY FIELD SOUTH PASS 89 LOUISIANA TOTAL
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Liquids................................. $21,135,624 $ 4,675,217 $ 1,301,430 $27,112,271
Natural gas............................. 524,130 1,344,229 2,726,382 4,594,741
Special Cost Escrow(1).................. (1,937,768) -- -- (1,937,768)
----------- ----------- ----------- -----------
19,721,986 6,019,446 4,027,812 29,769,244
Production costs and expenses(2).......... (8,820,283) (370,934) (901,227) (10,092,444)
Capital expenditures...................... (2,885,840) (182,658) (1,709,033) (4,777,531)
----------- ----------- ----------- -----------
Net Proceeds.............................. $ 8,015,863 $ 5,465,854 $ 1,417,552 $14,899,269
=========== =========== =========== ===========
Overriding Royalties paid to the
Trust(3)................................ $ 4,007,932 $ 2,721,553 $ 1,228,742 $ 7,958,227
=========== =========== ===========
Fee Lands Royalties.................................................................. 137,767
-----------
Royalties paid to the Trust.......................................................... $ 8,095,994
===========
</TABLE>
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<PAGE> 13
---------------
(1) As more fully described in Note 5 to the Financial Statements, the Working
Interest Owner informed the Trustee, that in accordance with its contractual
rights, it would escrow funds from the Productive Properties to provide for
the Trust's portion of estimated costs of dismantling platforms effective
with the July 1999 royalty distribution. The cumulative escrow balance at
September 30, 2000 was approximately $4,543,000 for the Jay Field property
and $2,600,000 for the South Pass 89 property, 50% of which would otherwise
have been distributable to the Trust. At September 30, 2000, the cumulative
escrow balance for the Offshore Louisiana property was $3,000,000, 90% of
which would otherwise have been distributable to the Trust. In February
2000, the Working Interest Owner informed the Trustee that it has elected at
this time not to escrow any additional funds effective with the April 2000
royalty distribution.
(2) Interest earned on funds escrowed for estimated future dismantlement costs
are reported as a reduction of production costs and expenses. Interest
earned for the 2000 Third Quarter and 2000 First Nine Months was
approximately $191,000 and $519,000, respectively. Pursuant to the terms of
the Trust Conveyances, interest earned on the escrowed funds for any month
will be calculated at an interest rate equal to 80% of the median between
the Prime Rate at the end of such month and the Prime Rate at the end of the
preceding month.
(3) 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 the Net Proceeds. As of September 30, 2000,
excess production costs to be recovered from future revenues total
approximately $17,100 for the Offshore Louisiana property.
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<PAGE> 14
The following unaudited schedules provide summaries of the Working Interest
Owner's calculation of the Net Proceeds from the Productive Properties and the
Royalties paid to the Trust for the Third Quarter and First Nine Months of 1999:
THIRD QUARTER 1999
<TABLE>
<CAPTION>
OFFSHORE
JAY FIELD SOUTH PASS 89 LOUISIANA TOTAL
----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Revenues:
Liquids................................. $ 4,006,763 $ 1,244,747 $ 206,898 $ 5,458,408
Natural gas............................. 89,667 491,651 624,269 1,205,587
----------- ----------- --------- -----------
Special Cost Escrow(1).................. (974,622) (1,159,154) (699,068) (2,832,844)
----------- ----------- --------- -----------
3,121,808 577,244 132,099 3,831,151
Production costs and expenses(2).......... (2,094,669) (237,841) (320,253) (2,652,763)
Capital expenditures...................... (693,419) (117,184) (4,909) (815,512)
----------- ----------- --------- -----------
Net Proceeds.............................. $ 333,720 $ 222,219 $(193,063) $ 362,876
=========== =========== ========= ===========
Overriding Royalties paid to the
Trust(3)................................ $ 146,607 $ 111,110 $ -- $ 257,717
=========== =========== =========
Fee Lands Royalties................................................................ 26,760
-----------
Royalties paid to the Trust........................................................ $ 284,477
===========
</TABLE>
FIRST NINE MONTHS 1999
<TABLE>
<CAPTION>
OFFSHORE
JAY FIELD SOUTH PASS 89 LOUISIANA TOTAL
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Liquids................................ $10,609,019 $ 3,770,192 $ 445,091 $14,824,302
Natural gas............................ 262,965 1,663,634 1,987,569 3,914,168
Special Cost Escrow(1)................. (974,622) (1,159,154) (699,068) (2,832,844)
----------- ----------- ----------- -----------
9,897,362 4,274,672 1,733,592 15,905,626
Production costs and expenses(2)......... (6,708,888) (773,746) (1,134,447) (8,617,081)
Capital expenditures..................... (2,511,724) (873,401) (371,283) (3,756,408)
----------- ----------- ----------- -----------
Net Proceeds............................. $ 676,750 $ 2,627,525 $ 227,862 $ 3,532,137
=========== =========== =========== ===========
Overriding Royalties paid to the
Trust(3)............................... $ 338,375 $ 1,313,763 $ -- $ 1,652,138
=========== =========== ===========
Fee Lands Royalties................................................................. 77,855
-----------
Royalties paid to the Trust......................................................... $ 1,729,993
===========
</TABLE>
---------------
(1) As more fully described in Note 5 to the Financial Statements, the Working
Interest Owner informed the Trustee, that in accordance with its contractual
rights, it would escrow funds from the Productive Properties to provide for
the Trust's portion of estimated costs of dismantling platforms effective
with the July 1999 royalty distribution. The cumulative escrow balance at
September 30, 1999 was approximately
-13-
<PAGE> 15
$975,000 for the Jay Field property and $1,159,000 for the South Pass 89
property, 50% of which would otherwise have been distributable to the Trust.
At September 30, 1999, the cumulative escrow balance for the Offshore
Louisiana property was $2,982,000, 90% of which would otherwise have been
distributable to the Trust.
(2) Interest earned on funds escrowed for estimated future dismantlement costs
are reported as a reduction of production costs and expenses. Interest
earned for the 1999 Third Quarter and 1999 First Nine Months was
approximately $70,000 and $188,000, respectively. Pursuant to the terms of
the Trust Conveyances, interest earned on the escrowed funds for any month
will be calculated at an interest rate equal to 80% of the median between
the Prime Rate at the end of such month and the Prime Rate at the end of the
preceding month.
(3) 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 the Net Proceeds. As of September 30, 1999,
excess production costs to be recovered from future revenues total
approximately $491,000 for the Offshore Louisiana property.
The following unaudited schedule summarizes the Working Interest Owner's
calculation of the Net Proceeds from the Productive Properties and the Royalties
paid to the Trust for the Third Quarter and First Nine Months of 2000 and 1999.
<TABLE>
<CAPTION>
THIRD QUARTER FIRST NINE MONTHS
-------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Proceeds:
Revenues................... $11,046,657 $ 3,831,151(1) $ 29,769,244(2) $15,905,626(3)
Production costs and
expenses................ (2,920,546) (2,652,763) (10,092,444) (8,617,081)
Capital expenditures....... (2,444,366) (815,512) (4,777,531) (3,756,408)
----------- ----------- ------------ -----------
Net Proceeds............... $ 5,681,745 $ 362,876 $ 14,899,269 $ 3,532,137
=========== =========== ============ ===========
Royalties paid to the Trust:
Overriding Royalties....... $ 2,775,452 $ 257,717 $ 7,958,227 $ 1,652,138
Fee Lands Royalties........ 44,045 26,760 137,767 77,855
----------- ----------- ------------ -----------
Royalties paid to the
Trust................... $ 2,819,497 $ 284,477 $ 8,095,994 $ 1,729,993
=========== =========== ============ ===========
</TABLE>
---------------
(1) Liquids and Natural Gas Revenues for the 1999 Three-Month Operating Period
($6,663,995) less Special Cost Escrow for the 1999 Three-Month Operating
Period ($2,832,844)
(2) Liquids and Natural Gas Revenues for the 2000 Nine-Month Operating Period
($31,707,012) less Special Cost Escrow for the 2000 Nine-Month Operating
Period ($1,937,768).
(3) Liquids and Natural Gas Revenues for the 1999 Nine-Month Operating Period
($18,738,470) less Special Cost Escrow for the 1999 Nine-Month Operating
Period ($2,832,844).
-14-
<PAGE> 16
Revenues (excluding deductions for Special Cost Escrow -- see schedule and
corresponding footnotes (1), (2) and (3) on page 14) of the Working Interest
Owner with respect to the Productive Properties increased approximately 65.8% in
the 2000 Three-Month Operating Period and 69.2% in the 2000 Nine-Month Operating
Period versus the comparable periods in 1999 primarily as a result of higher
commodity prices.
Average crude oil, natural gas liquids and natural gas prices received by
the Working Interest Owner in the 2000 Three-Month Operating Period attributable
to the Productive Properties were $28.35, $22.55 and $3.55, respectively. In the
comparable 1999 period average crude oil, natural gas liquids and natural gas
prices were $16.14, $12.22 and $2.24, respectively. In the 2000 Nine-Month
Operating Period, average crude oil, natural gas liquids and natural gas prices
were $26.14, $22.16 and $2.89, respectively. In the comparable 1999 Nine-Month
Operating Period average crude oil, natural gas liquids and natural gas prices
were $12.93, $10.09 and $2.01, respectively.
Production costs and expenses incurred by the Working Interest Owner on the
Productive Properties increased 10.1% and 17.1% in the 2000 Three-Month
Operating Period and the 2000 Nine-Month Operating Period, respectively,
primarily as a result of increased lease operating expenses at Jay Field that
were partially offset by decreases in lease operating expenses at South Pass 89
and Offshore Louisiana. In addition, production related taxes increased at the
Jay Field property.
Capital expenditures increased 199.7% and 27.2% in the 2000 Three-Month
Operating Period and the 2000 Nine-Month Operating Period, respectively,
primarily due to the drilling of a new well (East Cameron 195 field) at the
Offshore Louisiana property.
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 84,420
barrels for the 2000 Three-Month Operating Period and 13,368 barrels for the
1999 Three-Month Operating Period. Imputed natural gas production was 112,759
Mcf and 25,053 Mcf for the respective periods. The increase to imputed
production is primarily due to the combination of an increase in commodity
prices and a decrease in Special Cost Escrow amounts.
As described in more detail in the Trust's Annual Report and Form 10-K for
the year ended December 31, 1999, 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 tract as to which the Fee Lands
Royalties terminated. At September 30, 2000, the Fee Lands consisted of
approximately 35,000 gross acres in south Louisiana, approximately 3,831 of
which were under lease.
-15-
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4* -- Trust Agreement for LL&E Royalty Trust, dated as of June
1, 1983, between the Company and First City National Bank
of Houston, as Trustee.
27 -- Financial Data Schedule.
28.1* -- Agreement of General Partnership of LL&E Royalty
Partnership.
28.2* -- Form of Conveyance of Overriding Royalty Interests for
Forth Worth Basin Property.
28.3* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Alabama) Property.
28.4* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Florida) Property.
28.5* -- Form of Conveyance of Overriding Royalty Interests for
Offshore Louisiana Property.
28.6* -- Form of Conveyance of Overriding Royalty Interests for
South Pass 89 Property.
28.7* -- Form of Royalty Deed.
</TABLE>
---------------
* Incorporated by reference to Exhibits of like designation to Registrant's
Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
File No. 1-8518).
(b) Reports on Form 8-K
None.
-16-
<PAGE> 18
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: THE CHASE MANHATTAN BANK
Trustee
By: /s/ PETE FOSTER
--------------------------------
Pete Foster
Senior Vice President and Trust
Officer
Date: November 10, 2000
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.
-17-
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4* -- Trust Agreement for LL&E Royalty Trust, dated as of June
1, 1983, between the Company and First City National Bank
of Houston, as Trustee.
27 -- Financial Data Schedule.
28.1* -- Agreement of General Partnership of LL&E Royalty
Partnership.
28.2* -- Form of Conveyance of Overriding Royalty Interests for
Forth Worth Basin Property.
28.3* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Alabama) Property.
28.4* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Florida) Property.
28.5* -- Form of Conveyance of Overriding Royalty Interests for
Offshore Louisiana Property.
28.6* -- Form of Conveyance of Overriding Royalty Interests for
South Pass 89 Property.
28.7* -- Form of Royalty Deed.
</TABLE>
---------------
* Incorporated by reference to Exhibits of like designation to Registrant's
Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
File No. 1-8518).
