<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended June 30, 1996
--------------
Commission File No. 1-10982
-------
CROSS TIMBERS ROYALTY TRUST
Texas I.R.S. No. 75-6415930
NationsBank of Texas, N.A., Trustee
P.O. Box 1317
Fort Worth, Texas 76101-1317
Telephone Number 817/390-6592
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
Number of units of beneficial interest outstanding at August 12, 1996:
6,000,000
- - ---------
Page 1 of 16
<PAGE>
CROSS TIMBERS ROYALTY TRUST
PART I - FINANCIAL STATEMENTS
- - -----------------------------
Item 1. Financial Statements.
The condensed financial statements included herein are presented, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted pursuant to such rules and
regulations, although the Trustee believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Trust's latest annual report on Form 10-K. In the
opinion of the Trustee, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust at June 30, 1996, and the
distributable income and changes in trust corpus for the three and six-month
periods ended June 30, 1996 and 1995, have been included. Distributable income
for such interim periods is not necessarily indicative of the distributable
income for the full year.
Arthur Andersen LLP, independent certified public accountants, have made a
limited review of the condensed financial statements as of June 30, 1996, and
for the three and six-month periods ended June 30, 1996 and 1995 included
herein.
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
NationsBank of Texas, N.A., as Trustee
for the Cross Timbers Royalty Trust:
We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of the Cross Timbers Royalty Trust as of June 30, 1996 and the
related condensed statements of distributable income and changes in trust corpus
for the three and six-month periods ended June 30, 1996 and 1995. 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 in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
The accompanying condensed financial statements are prepared on a modified cash
basis as described in Note 1 which is a comprehensive basis of accounting other
than generally accepted accounting principles.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
the basis of accounting described in Note 1.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the Cross
Timbers Royalty Trust as of December 31, 1995 included in the Trust's 1995
annual report on Form 10-K, and in our report dated March 12, 1996, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed statement of assets, liabilities and trust
corpus as of December 31, 1995 is fairly stated in all material respects in
relation to the statement of assets, liabilities and trust corpus included in
the Trust's 1995 annual report on Form 10-K from which it has been derived.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
July 26, 1996
3
<PAGE>
CROSS TIMBERS ROYALTY TRUST
- - --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and short-term investments.................. $ 699,593 $ 428,610
Interest to be received.......................... 1,060 640
Net overriding royalty interests in oil and gas
properties - net (Note 1)................. 43,469,423 45,118,209
----------- ------------
$44,170,076 $45,547,459
=========== ============
LIABILITIES AND TRUST CORPUS
Distribution payable to Unit holders............. $ 700,653 $ 429,250
Contingencies (Note 3)
Trust corpus (6,000,000 Units of beneficial
interest authorized and outstanding)...... 43,469,423 45,118,209
----------- ------------
$44,170,076 $45,547,459
=========== ============
</TABLE>
The accompanying notes to condensed financial statements are an integral part of
these statements.
4
<PAGE>
CROSS TIMBERS ROYALTY TRUST
- - --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Royalty income.................... $1,910,966 $1,738,291 $3,468,644 $3,289,014
Interest income................... 2,704 2,451 4,870 4,577
---------- ---------- ---------- ----------
Total income...................... 1,913,670 1,740,742 3,473,514 3,293,591
Administration expense............ 53,770 52,598 89,096 96,508
---------- ---------- ---------- ----------
Distributable income.............. $1,859,900 $1,688,144 $3,384,418 $3,197,083
========== ========== ========== ==========
Distributable income per Unit
(6,000,000 Units).. $ .309984 $ .281357 $ .564071 $ .532847
========== ========== ========== ==========
</TABLE>
The accompanying notes to condensed financial statements are an integral part of
these statements.
5
<PAGE>
CROSS TIMBERS ROYALTY TRUST
- - --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Trust Corpus, beginning of period.. $44,329,287 $47,787,129 $45,118,209 $48,731,991
Amortization of net overriding
royalty interests........... (859,864) (1,001,804) (1,648,786) (1,946,666)
Distributable income............... 1,859,900 1,688,144 3,384,418 3,197,083
Distributions declared............. (1,859,900) (1,688,144) (3,384,418) (3,197,083)
----------- ----------- ----------- -----------
Trust Corpus, end of period........ $43,469,423 $46,785,325 $43,469,423 $46,785,325
=========== =========== =========== ===========
</TABLE>
The accompanying notes to condensed financial statements are an integral part of
these statements.
6
<PAGE>
CROSS TIMBERS ROYALTY TRUST
- - --------------------------------------------------------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF ACCOUNTING
The financial statements of the Cross Timbers Royalty Trust ("the Trust") are
prepared on the following basis:
- Royalty income recorded for a month is the amount computed and paid by
the interest owner, Cross Timbers Oil Company ("Cross Timbers Oil"), to
NationsBank of Texas, N.A. ("Trustee"), as Trustee for the Trust.
Royalty income consists of the amounts received by Cross Timbers Oil
from the sale of production less applicable costs ("net proceeds") from
the properties underlying the net overriding royalty interests ("Royalty
Trust Interests") conveyed to the Trust. Net proceeds are multiplied by
net profit percentages of 90% in the case of Royalty Trust Interests
carved from certain royalty interests in New Mexico, Oklahoma and Texas
("90% Royalty Trust Interests") and 75% in the case of Royalty Trust
Interests carved from seven working interest properties in Oklahoma and
Texas ("75% Royalty Trust Interests").
Applicable costs deducted in the calculation of net proceeds for the 90%
Royalty Trust Interests generally include applicable taxes,
transportation, marketing and legal costs, and do not include other
production and development costs. For the 75% Royalty Trust Interests,
such costs include production expenses, development costs, applicable
taxes, operating charges and other costs.
- Royalty income is computed separately for each of five conveyances under
which the Royalty Trust Interests were conveyed to the Trust. If monthly
costs exceed revenues for any conveyance ("excess costs"), such excess
cannot reduce royalty income from other conveyances, but is carried
forward with accrued interest to be recovered from future net proceeds
of that conveyance.
- Interest income, interest to be received and distribution payable to
Unit holders include interest to be earned from the monthly record date
(last business day of the month) through the date of the next
distribution to Unit holders.
- Trust expenses are recorded based on liabilities paid and cash reserves
established by the Trustee for liabilities and contingencies.
- Distributions to Unit holders are recorded when declared by the Trustee.
The financial statements of the Trust differ from financial statements
prepared in accordance with generally accepted accounting principles ("GAAP")
because revenues are not accrued in the month of production, expenses are
recognized when paid rather than when incurred, and certain cash reserves may
be established for contingencies which would not be accrued under GAAP. The
initial carrying value of the Royalty Trust Interests ($61,100,449)
represents the net book value from the historical accounting records
(successful efforts method) of predecessors to Cross Timbers Oil on February
12, 1991, the creation date of the Trust. Amortization of the Royalty Trust
Interests is calculated on a unit-of-production basis and is charged directly
to trust corpus. Accumulated amortization as of June 30, 1996 and December
31, 1995 is $17,631,026 and $15,982,240, respectively.
7
<PAGE>
2. FEDERAL INCOME TAXES
Tax counsel has advised the Trust that, under current tax laws, the Trust
will be classified as a grantor trust for Federal income tax purposes and
therefore is not subject to taxation at the trust level. However, the
opinion of tax counsel is not binding on the Internal Revenue Service.
The Unit holders are considered, for Federal income tax purposes, to own the
Trust's income and principal as though no trust were in existence. The income
of the Trust is deemed to have been received or accrued by the Unit holders
at the time such income is received or accrued by the Trust, rather than when
distributed by the Trust.
Cross Timbers Oil has advised the Trustee that the Trust receives royalty
income from coal seam gas wells. Production from coal seam gas wells drilled
after December 31, 1979, and prior to January 1, 1993, qualifies for the
Federal income tax credit for producing nonconventional fuels under Section
29 of the Internal Revenue Code. This tax credit, which was approximately
$1.01 per MMBtu for 1995, is recalculated annually based on each year's
qualified production through the year 2002. Such credit, based on the Unit
holder's pro rata share of qualifying production, may not reduce his regular
tax liability (after the foreign tax credit and certain other non-refundable
credits) below his tentative minimum tax. Any part of the Section 29 credit
not allowed for the tax year solely because of this limitation is subject to
certain carryover provisions. Each Unit holder should consult his tax advisor
regarding Trust tax compliance matters.
Based on 1996 qualifying sales volumes and the factors used in the
calculation of the 1995 coal seam tax credit, the credit for the quarter and
six months ended June 30, 1996 is estimated to be $.053 and $.101 per Unit,
respectively. Final 1996 coal seam tax credit data will be provided to Unit
holders with year-end tax information.
3. CONTINGENCIES
Cross Timbers Oil is pursuing claims in two lawsuits against working interest
owners that have suspended Trust revenues from a portion of the 90% Royalty
Trust Interests. The Trust joined one of these lawsuits as a plaintiff and,
as of July 1996, a tentative settlement has been reached in this particular
lawsuit in which the Trust is a plaintiff. The Trust's portion of the
settlement is $675,000, which could be a part of the monthly Trust
distribution to Unit holders of record on October 31 or November 29, 1996.
The accompanying financial statements do not include a receivable related to
such suspended revenues or expected settlement due the Trust. See Item 1 of
Part II.
In the remaining lawsuit in which the Trust is not a party, Cross Timbers Oil
has advised the Trustee that suspended revenues total approximately $600,000,
net to the Trust, as of December 31, 1995. This receivable is not recorded in
the Trust's financial statements. Additionally, if the plaintiffs are not
successful in this lawsuit, the Trust's discounted future net cash flows from
proved reserves as of December 31, 1995 would potentially be reduced by
$600,000. Although the plaintiffs are vigorously pursuing this case, neither
Cross Timbers Oil nor the Trustee can currently predict the ultimate outcome
of this lawsuit. For further information regarding legal proceedings of the
Trust, see Item 3 of the Trust's 1995 annual report on Form 10-K.
8
<PAGE>
Item 2. Trustee's Discussion and Analysis.
Three Months Ended June 30, 1996 and 1995
- - -----------------------------------------
For the quarter ended June 30, 1996, royalty income was $1,910,966 compared with
$1,738,291 for the second quarter of 1995. This 10% increase in royalty income
is primarily the result of higher oil prices and increased gas production.
After considering interest income of $2,704 and administration expense of
$53,770, distributable income for the quarter ended June 30, 1996 was
$1,859,900, or $.309984 per Unit of beneficial interest. Distributions of
$.097773, $.095435 and $.116776 per Unit were made to Unit holders of record on
April 30, May 31 and June 28, 1996, respectively. For the quarter ended June
30, 1995, distributable income was $1,688,144, or $.281357 per Unit.
Royalty income is recorded when received by the Trust, which is the month
following receipt by Cross Timbers Oil, and generally two months after oil
production and three months after gas production. Royalty income is generally
affected by three major factors: 1) oil and gas sales volumes, 2) oil and gas
sales prices and 3) costs deducted in the calculation of royalty income.
Because properties underlying the 90% Royalty Trust Interests are royalty and
overriding royalty interests, they generally bear no costs other than production
and property taxes, related legal costs, and marketing and transportation
charges. In addition to these costs, the 75% Royalty Trust Interests are
subject to production and development costs, since the properties underlying the
75% Royalty Trust Interests are working interests.
Volumes
Second quarter oil sales volumes decreased 5% from 1995 to 1996 primarily
because of the timing of cash receipts and natural decline, partially offset by
the effects of infill drilling on some of the underlying working interest
properties.
Gas sales volumes increased 6% from second quarter 1995 to 1996, primarily
because of higher production levels in the San Juan Basin. Second quarter 1995
production from this region was partially curtailed because of low gas prices.
Prices
The average oil price for second quarter 1996 was $18.46 per barrel, an increase
of 16% from the second quarter 1995 average price of $15.98.
The average gas sales price for the second quarter of 1996 was $1.47 per
thousand cubic feet ("Mcf"), unchanged from the comparable 1995 price. Because
of a refund of certain gathering and transportation charges by a purchaser, the
average gas price for second quarter 1995 is approximately $.19 per Mcf higher
than it would have been otherwise.
Natural gas prices have remained relatively low primarily because of depressed
prices in California, the primary market for San Juan Basin gas. During July
1996, however, San Juan Basin gas prices increased as much as 40% over average
prices for the first six months of 1996 from this region. Increases in San Juan
Basin gas prices have been attributed to increased California demand related to
prolonged hot weather. Additionally, California gas supplies were reduced
because of pipeline maintenance and new pipeline capacity out of the San Juan
Basin that now allows more production to be delivered to eastern markets. Cross
Timbers Oil has advised the Trustee that higher San Juan Basin prices, although
they may not be sustained, should have a positive impact on fourth quarter 1996
Trust distributions.
9
<PAGE>
Costs
Costs deducted in the calculation of second quarter 1996 royalty income (see
"Calculation of Royalty Income") increased 6% or $76,363 from total costs for
second quarter 1995. This was a result of a 40% increase in development costs
partially offset by a 2% decrease in production expense. An increase in
production taxes related to increased oil and gas sales was offset by a decrease
in estimated property taxes.
The increase in development costs was a result of infill drilling projects on
some of the underlying working interest properties that began in second quarter
1995. Production expense varies with the timing of maintenance projects on the
underlying working interest properties.
Six Months Ended June 30, 1996 and 1995
- - ---------------------------------------
For the six months ended June 30, 1996, royalty income was $3,468,644 compared
with $3,289,014 for the same 1995 period. The effects of higher oil prices and
gas sales volumes during the first six months of 1996 were partially offset by
higher costs, resulting in a 5% net increase in royalty income.
After considering interest income of $4,870 and administration expense of
$89,096, distributable income for the six months ended June 30, 1996 was
$3,384,418, or $.564071 per Unit of beneficial interest. For the six months
ended June 30, 1995, distributable income was $3,197,083, or $.532847 per Unit.
Volumes
Oil sales volumes for the first half of 1996 were essentially unchanged from the
comparable 1995 period. Decreases related to natural production decline were
offset primarily by the effects of infill drilling on some of the underlying
working interest properties.
Gas sales volumes increased 4% from the first six months of 1995 to 1996. This
increase is primarily the result of increased production from the San Juan
Basin.
Prices
The average oil price for the first half of 1996 was $17.28 per barrel, an
increase of 12% from the comparable 1995 price of $15.40.
The average gas price for the first six months of 1996 declined to $1.41 per
Mcf, or 1% below the comparable 1995 price of $1.43. Because of a refund of
certain gathering and transportation charges by a purchaser, the average gas
price for the first half of 1995 was approximately $.10 per Mcf higher than it
would have been otherwise.
San Juan Basin gas prices have remained low because of gas oversupplies in
California, the primary market for San Juan Basin gas. Prices for San Juan
Basin production improved, however, during July 1996. See discussion and
analysis of second quarter prices above.
Costs
Costs deducted in the calculation of royalty income for the first half of 1996
increased 13% or $291,960 from total costs for the first half of 1995. This is
a result of a 52% increase in development costs, a 6% increase in production
expenses and a 3% increase in production and property taxes.
Increased development costs are related to infill drilling projects that began
in second quarter 1995 on some of the underlying working interest properties,
while production expenses generally fluctuate based
10
<PAGE>
on the timing of maintenance projects. Production and property taxes increased
primarily because of higher oil and gas revenues, partially offset by decreased
property tax accruals.
COMPARATIVE OIL AND GAS SALES
Oil and gas sales attributable to the Underlying Properties and the Royalty
Trust Interests are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, (a) June 30, (a)
-------------------- -----------------------
1996 1995 1996 1995
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OIL SALES (Bbls)
Underlying Properties (b).... 113,227 119,359 219,693 219,798
Average per day............ 1,258 1,341 1,207 1,214
Average price.............. $ 18.46 $ 15.98 $ 17.28 $ 15.40
Royalty Trust Interests (b).. 40,932 41,595 76,443 78,364
GAS SALES (Mcf)
Underlying Properties (b).... 1,023,698 962,327 1,988,408 1,908,887
Average per day............ 11,249 10,693 10,866 10,488
Average price.............. $ 1.47 $ 1.47 $ 1.41 $ 1.43
Royalty Trust Interests (b).. 886,015 806,101 1,716,772 1,621,257
</TABLE>
(a) Because of the interval between time of production and receipt of royalty
income by the Trust (1) oil and gas sales for the quarter ended June 30
generally represent oil production for the period February through April and
gas production for the period January through March and (2) oil and gas
sales for the six months ended June 30 generally represent oil production
for the period November through April and gas production for the period
October through March.
(b) Oil and gas sales volumes are allocated to the Royalty Trust Interests based
upon a formula that considers oil and gas prices and the total amount of
production expenses and development costs. Changes in any of these factors
may result in disproportionate fluctuations in volumes allocated to the
Royalty Trust Interests. Therefore, comparative discussion of oil and gas
sales is based on the Underlying Properties.
11
<PAGE>
CALCULATION OF ROYALTY INCOME
Royalty income is computed by multiplying net proceeds from the properties
underlying the Royalty Trust Interests by specified net profit percentages of
(a) 90% in the case of Royalty Trust Interests carved from royalty interests in
New Mexico, Oklahoma and Texas ("90% Royalty Trust Interests") and (b) 75% in
the case of Royalty Trust Interests carved from seven working interest
properties in Oklahoma and Texas ("75% Royalty Trust Interests"). See Note 1 to
Condensed Financial Statements. Royalty income received by the Trust for the
quarters ended June 30, 1996 and 1995 was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------
1996 1995
----------------------- -----------------------
90% 75% 90% 75%
Royalty Royalty Royalty Royalty
Trust Trust Trust Trust
Interests Interests Interests Interests
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Oil sales......................... $ 452,291 $1,638,327 $ 382,411 $1,524,923
Gas sales......................... 1,453,342 48,448 1,372,527 38,636
---------- ---------- ---------- ----------
Total........................ 1,905,633 1,686,775 1,754,938 1,563,559
---------- ---------- ---------- ----------
COSTS
Taxes on production and property.. 188,887 149,568 174,601 162,716
Production expenses (a)........... 7,765 671,251 34,786 658,152
Development costs................. - 368,778 - 263,473
Excess cost recovery and accrued
interest (b).................. - - - 16,158
---------- ---------- ---------- ----------
Total........................ 196,652 1,189,597 209,387 1,100,499
---------- ---------- ---------- ----------
NET PROCEEDS.................................... 1,708,981 497,178 1,545,551 463,060
Net Profit Percentage........................... 90% 75% 90% 75%
---------- ---------- ---------- ----------
ROYALTY INCOME.................................. $1,538,083 $ 372,883 $1,390,996 $ 347,295
========== ========== ========== ==========
</TABLE>
(a) Production expenses for the 75% Royalty Trust Interests include an overhead
fee which is deducted and retained by Cross Timbers Oil. This fee is
currently $19,057 per month, or $57,171 per quarter. This overhead fee is
subject to adjustment each May based on an oil and gas industry index.
(b) See Note 1 to Condensed Financial Statements.
12
<PAGE>
PART II - OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings.
The Trust, Cross Timbers Oil and two other overriding royalty interest owners
have reached a tentative settlement involving a lawsuit filed by the Trust and
the other plaintiffs in the Eleventh Judicial District Court in San Juan County,
New Mexico, against Hallador Petroleum Company ("Hallador") and other owners of
working interests in certain gas wells located in San Juan County, New Mexico,
in which the Trust owns a net profits interest. The Trust and the other
plaintiffs were seeking to recover revenues suspended by the defendants and a
judgment confirming the plaintiffs' interests. The defendants allege that
certain provisions in earlier documents signed by the plaintiffs' predecessors-
in-title purport to convert the overriding royalty interests owned by Cross
Timbers Oil and the other plaintiffs into working interests during any month in
which average daily production of natural gas falls below 500 Mcf per well.
According to the proposed settlement, Cross Timbers Oil, in return for a payment
of $750,000, will reduce its 7.5% overriding royalty interest in these
properties to a 1.875% overriding royalty interest that does not convert to a
working interest when daily production falls below 500 Mcf per well. The Trust
owns a 90% net profits interest in the interest owned by Cross Timbers Oil. The
Trust's portion of the settlement is $675,000, which could be a part of the
monthly Trust distribution to Unit holders of record on October 31 or November
29, 1996.
Items 2 through 4. Not applicable.
Item 5. Other Information.
See Item 1 of Part II above.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Number
and Description Page
--------------- ----
(4)(a) Cross Timbers Royalty Trust Indenture Amended and
Restated on January 13, 1992 by NationsBank of Texas,
N.A., as Trustee, heretofore filed as Exhibit 3.1 to
the Trust's Registration Statement No. 33-44385 filed
with the Securities and Exchange Commission on
February 19, 1992, is incorporated herein by reference.
(b) Net Overriding Royalty Conveyance (Cross Timbers Royalty
Trust, 90% -Texas) from South Timbers Limited Partnership,
West Timbers Limited Partnership, North Timbers Limited
Partnership, East Timbers Limited Partnership, Hickory
Timbers Limited Partnership, and Cross Timbers Partners,
L.P. (predecessors of Cross Timbers Oil Company, L.P. which
subsequently merged into Cross Timbers Oil Company) to NCNB
Texas
13
<PAGE>
National Bank (now NationsBank of Texas, N.A.), as Trustee,
dated February 12, 1991 (without Schedules A and B),
heretofore filed as Exhibit 10.1 to the Trust's Registration
Statement No. 33-44385 filed with the Securities and Exchange
Commission on February 19, 1992, is incorporated herein by
reference.
(c) Net Overriding Royalty Conveyance (Cross Timbers Royalty
Trust, 75% -Texas) from South Timbers Limited Partnership,
West Timbers Limited Partnership, North Timbers Limited
Partnership, East Timbers Limited Partnership, Hickory
Timbers Limited Partnership, and Cross Timbers Partners,
L.P. (predecessors of Cross Timbers Oil Company, L.P. which
subsequently merged into Cross Timbers Oil Company) to NCNB
Texas National Bank (now NationsBank of Texas, N.A.), as
Trustee, dated February 12, 1991 (without Schedules A and B),
heretofore filed as Exhibit 10.5 to the Trust's Registration
Statement No. 33-44385 filed with the Securities and Exchange
Commission on February 19, 1992, is incorporated herein by
reference.
(15) Awareness letter of Arthur Andersen LLP 16
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CROSS TIMBERS ROYALTY TRUST
By NATIONSBANK OF TEXAS, N.A., TRUSTEE
By JOE B. GRISSOM
----------------------------------------------
Joe B. Grissom
Vice President
CROSS TIMBERS OIL COMPANY
Date: August 12, 1996 By LOUIS G. BALDWIN
----------------------------------------------
Louis G. Baldwin
Senior Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT 15
NationsBank of Texas, N.A. as Trustee
for the Cross Timbers Royalty Trust:
We are aware that Cross Timbers Oil Company has incorporated by reference in its
Registration Statement No. 33-55784 on Form S-8 Cross Timbers Royalty Trust's
Form 10-Q for the quarter ended June 30, 1996, which includes our report dated
July 26, 1996, covering the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933, that report is
not considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
August 12, 1996
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 699,593 0
<SECURITIES> 0 0
<RECEIVABLES> 1,060 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 61,100,449 0
<DEPRECIATION> 17,631,026 0
<TOTAL-ASSETS> 44,170,076 0
<CURRENT-LIABILITIES> 700,653 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 43,469,423 0
<TOTAL-LIABILITY-AND-EQUITY> 44,170,076 0
<SALES> 1,910,966 3,468,644
<TOTAL-REVENUES> 1,913,670 3,473,514
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 53,770 89,096
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,859,900 3,384,418
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,859,900 3,384,418
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,859,900 3,384,418
<EPS-PRIMARY> .310 .564
<EPS-DILUTED> .310 .564
</TABLE>
