SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 11, 1996
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NORTH EUROPEAN OIL ROYALTY TRUST
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(Exact name of Registrant as specified in its charter)
Commission File No. 1-8245
Delaware 22-2084119
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(State of organization) (IRS Employer I.D. No.)
Suite 19A, 43 West Front Street, Red Bank, N.J. 07701
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(Address of principal executive offices)
908-741-4008
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(Registrant's telephone number including area code)
This report (including exhibits) consists of 13 pages.
The Exhibit Index is located on page 4.
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Item 5. Other Materially Important Event.
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On January 11, 1996, the registrant Trust mailed to
certificate holders of units of beneficial interest in the Trust
an advisory letter, dated January 8, 1996, concerning the
appropriate percentage for cost depletion computations to be made
by such holders under the provisions of the Internal Revenue
Code. A copy of the letter is attached to this report as Exhibit
99.1.
The information included in the advisory letter to
certificate holders was based upon computations furnished to the
Trust by Ralph E. Davis Associates, Inc., 3555 Timmons Lane,
Suite 1105, Houston, Texas, 77027 in a letter report dated
December 21, 1995. A copy of this letter report is attached as
Exhibit 99.2. These computations were also partially based upon
the reserve report furnished to the Trustees and to be included
as Exhibit 99 to the Annual Report on Form 10-K for the fiscal
year ended October 31, 1995. Reference is made to Item 2 of that
Form 10-K for a description of the limited nature of certain of
these computations.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99.1. Letter to certificate
holders dated January 8, 1996.
Exhibit 99.2. Letter report from
Ralph E. Davis Associates, Inc.
dated December 21, 1995.
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 hereunto duly authorized.
NORTH EUROPEAN OIL ROYALTY TRUST
________________________________
(Registrant)
By: /S/ John R. Van Kirk
______________________________
John R. Van Kirk
Managing Director
Dated: January 12, 1996
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EXHIBIT INDEX
Page
Exhibit 99.1. Letter to certificate 5
holders dated January 8, 1996.
Exhibit 99.2. Letter report from 8
Ralph E. Davis Associates, Inc.,
dated December 21, 1995.
North European Oil Royalty Trust
Office of the Managing Director
P.O. Box 456
Red Bank, New Jersey 07701
(908) 741-4008
IMPORTANT
RETAIN THIS LETTER FOR PREPARATION OF YOUR
1995 INCOME TAX RETURNS
THE TRUST DOES NOT FILE NOR FURNISH TO OWNERS FORM 1099
January 8, 1996
To the Present and Former Unit Owners of
North European Oil Royalty Trust:
This letter sets forth the information you will require for
preparation of your personal income tax returns in connection
with ownership of units of beneficial interest ("Units") in North
European Oil Royalty Trust ("Trust") during 1995.
For Federal income tax reporting purposes, each owner of
Units in the Trust is considered to be a grantor or substitute
grantor as well as a beneficiary of the Trust. As such, you are
deemed to have received your pro rata share of overriding
royalties when paid to the Trust and are permitted to deduct your
share of Trust expenses. Consequently, your net taxable income
may not correspond exactly to the cash distributions received.
TRUST DISTRIBUTIONS SHOULD NOT BE INCLUDED ON INCOME TAX RETURNS
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AS "DIVIDEND INCOME" AND ARE NOT ELIGIBLE FOR THE DIVIDENDS
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RECEIVED DEDUCTION FOR CORPORATIONS.
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The Internal Revenue Service has ruled that the overriding
royalty rights held by the Trust represent economic interest in
oil and gas deposits. Consequently, income realized from such
interests is taxable to each Unit owner as ordinary income
subject to cost depletion. Each Unit owner's basis for computing
cost depletion is the adjusted cost basis for their Units. This
adjusted cost basis is to be reduced annually by the depletion
previously allowed. Ralph E. Davis Associates, Inc. of Houston,
Texas, based upon computations of proven reserves estimated in
accordance with accepted engineering analytical principles, has
recommended that the percentage to be applied to the cost basis
to determine deductions for cost depletion for the year 1995 is
9.343%. The suggested percentage for cost depletion deduction
will be adjusted annually in accordance with reported production
results and revised reserve estimates. Since the above
percentage covers the entire year 1995, if you owned Units for
only a portion of the year, you are required to pro rate the
percentage depletion in the ratio that the total income per Unit
shown on the schedule below for the period of your ownership
bears to the total income per Unit for the entire year.
If you owned Units for the period January 1, 1995 through
December 31, 1995, you will be considered to have received and
expended, on the cash basis, the respective totals shown below
for each Unit. On the other hand, if you owned Units during only
a portion of that period, then the schedule shows the amounts of
income and deductible expenses reportable by you for each Unit
owned for the respective months. For your information, income is
received between the 24th and the end of each month.
Income per Unit Expenses per Unit
January 1995 $ 0.1343 $ 0.0085
February 0.1019 0.0094
March 0.1406 0.0066
April 0.1945 0.0029
May 0.1232 0.0058
June 0.1368 0.0043
July 0.1076 0.0050
August 0.1209 0.0053
September 0.1218 0.0041
October 0.1214 0.0044
November 0.1220 0.0067
December 0.1083 0.0067
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TOTAL 1995 $ 1.5333 $ 0.0726
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Income and expenses should be reported on Federal Income Tax
Form 1040, Schedule E. Under Part I, Income or Loss from Rentals
and Royalties, line 1 enter property description as "oil and gas
overriding royalty rights, Germany through North European Oil
Royalty Trust." Your income and expenses are calculated by
multiplying the above per Unit figures by the number of Units you
owned. Your income should be entered on line 4. Expenses should
be entered on line 18 as "miscellaneous Trust expenses." Your
cost depletion deduction should be entered on line 20. This
figure is derived by multiplying the total adjusted cost of all
your Units by .09343. Your adjusted cost is your original cost
minus depletion deducted in prior years. Your net reportable
income or loss should be entered on lines 22 and 26 in Part I and
on line 40 in Part V and is determined by subtracting the amounts
entered on lines 18 and 20 from the amount on line 4. All of the
above entries should be adjusted for the period of time you owned
your Units, if you did not own them throughout 1995.
The royalty income received by the Trust represents income
from Germany. Although there are no German taxes imposed on this
income, this information should be considered if you have
available foreign tax credits from other sources.
The Trust will submit this letter and the listing of Unit
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owners during 1995 to the Internal Revenue Service. This list
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will contain names, addresses, tax ID or Social Security numbers;
you may wish to attach a copy of this letter to your tax returns.
Most sincerely,
/S/ John R. Van Kirk
NORTH EUROPEAN OIL ROYALTY TRUST
COMPUTATION OF COST DEPLETION FACTOR
For 1995 Tax Year
Ralph E. Davis Associates, Inc.
Houston, Texas December, 1995
Ralph E. Davis Associates, Inc.
Consultants - Petroleum and Natural Gas
3555 Timmons Lane - Suite 1105
Houston, Texas 77027
(713) 622-8955
December 21, 1995
The Trustees of
North European Oil Royalty Trust
P. O. Box 456
Red Bank, New Jersey 07701
Gentlemen:
In accordance with your request, we have preformed an
estimate of remaining proved producing reserves attributable to
the overriding royalty interests of North European Oil Royalty
Trust ("Trust" or "NEORT") in the Northwest German Basin of the
Federal Republic of Germany. Based on that estimate, we have
submitted our reserve report (the "Davis Report") to you. The
Davis Report forms the basis on which the calculation of the cost
depletion percentage for 1995 is made. As detailed in Attachment
A, the total cost depletion to be taken for the twelve month
period ending December 31, 1995 is 9.343 percent.
In annual reserve reports prepared for the Trust prior to
1992, reserve estimates were presented for the Trust's interests
in fields located in the Alpine Foreland Area of Bavaria and
other non-Oldenburg areas. Reserves and net sales for these areas
were used in the calculation of cost depletion in those prior
years. Reports from 1992 forward omit such an estimate. The
Trust still receives royalty payments from these interests, but
the annual revenues are less than two (2) percent of the total
royalties received by the Trust and the expenses associated with
the computations necessary to determine the reserve estimates are
not warranted by the royalties received. The exclusion of these
reserves does not have a material effect on the calculation of
the cost depletion percentage.
The Trust's net proved producing reserves as of October 1,
1995 and net sales for the twelve month period ending
September 30, 1995 are as follows:
Reserves Sales
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Oil, Barrels 82,687 9,226
Associated Gas, MMcf 62 8
Non-Associated Gas, MMcf 39,910 4,098
Sulfur - Short Tons 40,851** 4,081**
(MMcf = millions of cubic feet @ 14.7 psia and 60 Degrees
Fahrenheit)
**Note: At current prices no royalties are presently being
paid under the Mobil sulfur royalty.
Computation of Cost Depletion Percentage
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A cost base for the Trust was established as of January 1,
1976 for each category of reserves. This cost base is adjusted
(reduced) each year by an amount of depletion that is calculated
by multiplying the remaining cost base at the beginning of the
current year by a unit cost depletion factor. The unit cost
depletion factor is the ratio of the net sales during the current
year to the adjusted net proved producing reserves at the
beginning of the current year.
The categories of reserves considered are oil, associated
gas and non-associated gas. Sulfur is a by-product of the gas
production and is not considered in the cost depletion
calculation.
Significant items in the cost depletion percentage
calculation that appear on Attachment A as specific item numbers
( ) and their sources are as follows:
The cost base as of 1-1-94 (2) and the depletion taken in
1994 (3) were obtained from the previous year's report. The cost
base for 1-1-95 (4) forms the initial starting point for the
calculation of the cost depletion percentage for the 1995 tax
year. The cost base for 1-1-95 (4) then is (2)-(3).
The adjusted net proved producing reserves as of 10-1-94 (8)
is obtained by adding back annual sales (7) to the current
estimated remaining net proved producing reserves as of 10-1-95
(6). Therefore (8)=(6)+(7).
The unit cost depletion factor (10) is obtained by dividing
net sales for the taxable year (7) by adjusted net proved
producing reserves at the beginning of the taxable year (8).
Therefore (10)=(7)/(8).
The cost depletion to be taken for each category of reserves
that is used to reduce the original base each year (11) then is
the product of the unit cost depletion factor (10) multiplied by
the cost base at the beginning of the taxable year (4).
Therefore (11)=(4)x(10).
The total Trust cost depletion percentage then is the sum of
the cost depletion to be taken on each category (11) divided by
the sum of the cost base as of the beginning of the taxable year
for each category. Therefore (12)= Sum(11)/Sum(4).
The Trust's cost depletion percentage represents the
allowable cost depletion for the current tax year, expressed as a
percentage of the cost base at the beginning of the tax year.
Sincerely yours,
RALPH E. DAVIS ASSOCIATES, INC.
/S/ Larry A. Barnett, P.E.
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Larry A. Barnett, P.E.
Senior Vice-President
LAB:sw
ATTACHMENT A
NORTH EUROPEAN OIL ROYALTY TRUST
COMPUTATION OF COST DEPLETION FACTOR
For the Year Ending December 31, 1995
OLDENBURG
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1.Product Associated Non-Assoc.
Oil Gas Gas
Barrels MMCF MMCF
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NEORT COST BASE ALLOCATION (%)
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2. Cost base as of 1-1-94 0.73044 0.06295 20.31197
3. Less depletion taken
during 1994 0.06750 0.00597 1.62286
4. Cost base as of 1-1-95 0.66294 0.05698 18.68911
NEORT NET RESERVES (Barrels of Oil and Millions of Cubic Feet)
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5. Estimated remaining net
proved producing reserves
as of 10-1-94 88,235 105 42,391
6. Estimated remaining net
proved producing reserves
as of 10-1-95 82,687 62 39,910
7. Net sales from 10-1-94
to 10-1-95 9,226 8 4,098
8. Adjusted net proved
producing reserves
as of 10-1-94 91,913 70 44,008
9. Reserves adjustments
during period 3,678 -35 1,617
COST DEPLETION CALCULATION (%)
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10. Unit cost depletion
factor 0.10038 0.11429 0.09312
11. 1995 cost depletion
to be taken 0.06654 0.00651 1.74032
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12. Total NEORT cost depletion percentage = 9.343 percent of
1-1-95 cost base
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Footnotes:
Line (2) from 1994 depletion computations
Line (3) from 1994 depletion computations
Line (4) = Line (2) - Line (3)
Line (5) from reserves review as of 10-1-94
Line (6) from reserves review as of 10-1-95
Line (7) from OEG and MOBIL statements
Line (8) = Line (6) + Line (7)
Line (9) = Line (8) - Line (5)
Line (10) = Line (7)/Line (8)
Line (11) = Line (10) x Line (4)
Line (12) = Sum of Line (11)/Sum of Line (4)
