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 JUNE 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11450
-------------------
SANTA FE ENERGY TRUST
(Exact name of registrant as specified in its charter)
TEXAS 76-6081498
(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
CORPORATE TRUST DIVISION
600 TRAVIS, SUITE 1150
HOUSTON, TEXAS 77002
(Address of principal executive offices, including zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 216-5100
-------------------
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 / /
Depository Units outstanding at August 12, 1994 -- 6,300,000
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SANTA FE ENERGY TRUST
STATEMENT OF CASH PROCEEDS AND DISTRIBUTABLE CASH (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1994 1993 1994 1993
--------- -------- ------- -------
Royalty Income
ODC Royalty---------------------- $ 1,058 $ 607 $ 1,881 $ 687
Willard Royalty------------------ 366 536 788 893
Net Profits Royalty-------------- 1,298 1,972 2,786 3,505
------- ------- ------- -------
Total Royalties---------------------- 2,722 3,115 5,455 5,085
Administrative Fee to Santa Fe------- (52) (50) (102) (83)
Trust Formation Costs---------------- -- (75) (108) (75)
Advance from Santa Fe Energy
Resources, Inc.-------------------- 150 -- 306 --
Repayment of Advance from Santa Fe
Energy Resources, Inc. ------------ (156) -- (211) --
Cash Withheld for Trust Expenses----- (144) (50) (300) (50)
------- ------- ------- -------
Distributable Cash------------------- $ 2,520 $ 2,940 $ 5,040 $ 4,877
======= ======= ======= =======
Distributable Cash per Trust Unit (in
dollars)--------------------------- 0.40000 0.46660 0.80000 0.77413
======= ======= ======= =======
Trust Units Outstanding
(thousands)-------------------------- 6,300 6,300 6,300 6,300
======= ======= ======= =======
STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1994 1993
--------- ---------
(UNAUDITED)
ASSETS
Cash--------------------------------- $ 23 $ --
--------- ---------
Investment in Royalty Interests, at
cost------------------------------- 87,276 87,276
Less: Accumulated Amortization------- (15,103) (9,920)
--------- ---------
72,173 77,356
--------- ---------
$ 72,196 $ 77,356
========= =========
LIABILITIES AND TRUST CORPUS
Advance from Santa Fe Energy
Resources, Inc.-------------------- $ 150 $ 55
Trust Corpus (6,300,000 Trust Units
issued and outstanding)------------ 72,046 77,301
--------- ---------
$ 72,196 $ 77,356
========= =========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SANTA FE ENERGY TRUST
STATEMENT OF CHANGES IN TRUST CORPUS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Balance at December 31, 1993--------- $ 77,301
Cash Proceeds---------------------- 5,245
Cash Distributions----------------- (5,040)
Trust Expenses--------------------- (277)
Amortization of Royalty
Interests------------------------ (5,183)
---------
Balance at June 30, 1994------------- $ 72,046
=========
Balance at December 31, 1992--------- $ 87,277
Cash Proceeds---------------------- 4,927
Cash Distributions----------------- (4,877)
Trust Expenses--------------------- (39)
Amortization of Royalty
Interests------------------------ (4,379)
---------
Balance at June 30, 1993------------- $ 82,909
=========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SANTA FE ENERGY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) THE TRUST
Santa Fe Energy Trust (the 'Trust') was formed on October 22, 1992,
with Texas Commerce Bank National Association as trustee (the 'Trustee'),
to acquire and hold certain royalty interests (the 'Royalty Interests') in
certain properties (the 'Royalty Properties') conveyed to the Trust by
Santa Fe Energy Resources, Inc. ('Santa Fe'). The Royalty Interests consist
of two term royalty interests in two production units in the Wasson field
in west Texas (the 'Wasson Royalties') and a net profits royalty interest
in certain royalty and working interests in a diversified portfolio of
properties located in twelve states (the 'Net Profits Royalties'). The
Royalty Interests are passive in nature and the Trustee has no control over
or responsibility relating to the operation of the Royalty Properties. The
Trust will be liquidated on February 15, 2008 (the 'Liquidation Date').
In November 1992, 5,725,000 Depositary Units, each consisting of
beneficial ownership of one unit of undivided beneficial interest in the
Trust ('Trust Units') and a $20 face amount beneficial ownership interest
in a $1,000 face amount zero coupon United States Treasury obligation
maturing on or about February 15, 2008, were sold in a public offering for
$20 per Depositary Unit. A total of $114.5 million was received from public
investors, of which $38.7 million was used to purchase the Treasury
obligations and $5.7 million was used to pay underwriting commissions and
discounts. Santa Fe received the remaining $70.1 million and 575,000
Depositary Units. In the first quarter of 1994 Santa Fe sold in a public
offering the 575,000 Depositary Units which it held.
The trust agreement under which the Trust was formed (the 'Trust
Agreement') provides, among other things, that:
o the Trustee shall not engage in any business or commercial
activity or acquire any asset other than the Royalty Interests
initially conveyed to the Trust;
o the Trustee may not sell all or any portion of the Wasson
Royalties or substantially all of the Net Profits Royalties
without the prior consent of Santa Fe;
o Santa Fe may sell the Royalty Properties, subject to and
burdened by the Royalty Interests, without consent of the
holders of the Trust Units; following any such transfer, the
Royalty Properties will continue to be burdened by the Royalty
Interests and after any such transfer the royalty payment
attributable to the transferred property will be calculated
separately and paid by the transferee;
o the Trustee may establish a cash reserve for the payment of
any liability which is contingent, uncertain in amount or that
is not currently due and payable;
o the Trustee is authorized to borrow funds required to pay
liabilities of the Trust, provided that such borrowings are
repaid in full prior to further distributions to the holders
of the Trust Units;
o the Trustee will make quarterly cash distributions to the
holders of the Trust Units.
(2) BASIS OF ACCOUNTING
The financial statements of the Trust are prepared on the cash basis of
accounting for revenues and expenses. Royalty income is recorded when
received (generally during the quarter following the end of the quarter in
which the income from the Royalty Properties is received by Santa Fe) and
is net
4
of any cash basis exploration and development expenditures and amounts
reserved for future exploration and development costs. Expenses of the
Trust, which will include accounting, engineering, legal, and other
professional fees, Trustee fees, an administrative fee paid to Santa Fe and
out-of-pocket expenses, are recognized when paid. Under generally accepted
accounting principles, revenues and expenses would be recognized on an
accrual basis. Amortization of the Trust's investment in Royalty Interests
is recorded using the unit-of-production method in the period in which the
cash is received with respect to such production.
The conveyance of the Royalty Interests to the Trust was accounted for
as a purchase transaction. The $87,276,000 reflected in the Statement of
Assets and Trust Corpus as Investment in Royalty Interests represents
6,300,000 Trust Units valued at $20 per unit less the $38,724,000 paid for
the Treasury obligations. The carrying value of the Trust's investment in
the Royalty Interests is not necessarily indicative of the fair value of
such Royalty Interests.
The Trust is a grantor trust and as such is not subject to income taxes
and accordingly no recognition has been given to income taxes in the
Trust's financial statements. The tax consequences of owning Trust Units
are included in the income tax returns of the individual Trust Unit
holders.
During 1993 net cash proceeds (before deducting Trust expenses)
exceeded cash distributions by $125,000. In order to pay current Trust
expenses Santa Fe advanced the Trust $55,000, which amount was due to Santa
Fe at December 31, 1993. During the first six months of 1994 net cash
proceeds (before deducting Trust expenses) exceeded cash distributions by
$205,000, a portion of which was used to repay the advance received from
Santa Fe in 1993. In order to pay current Trust expenses, during the first
six months of 1994 Santa Fe advanced the Trust $306,000, of which $150,000
was due to Santa Fe at June 30, 1994.
(3) THE ROYALTY INTERESTS
The Wasson Royalties consist of interests conveyed out of Santa Fe's
royalty interest in the Wasson ODC Unit (the 'ODC Royalty') and the Wasson
Willard Unit (the 'Willard Royalty'). The ODC Royalty entitles the Trust to
receive quarterly royalty payments with respect to 12.3934% of the actual
gross oil production from the Wasson ODC Unit, subject to certain quarterly
limitations set forth in the conveyance agreement, for the period from
November 1, 1992 to December 31, 2007. The Willard Royalty entitles the
Trust to receive quarterly royalty payments with respect to 6.8355% of the
actual gross oil production from the Wasson Willard Unit, subject to
certain quarterly limitations set forth in the conveyance agreement, for
the period from November 1, 1992 to December 31, 2003.
The Net Profits Royalties entitle the Trust to receive, on a quarterly
basis, 90% of the net proceeds, as defined in the conveyance agreement,
from the sale of production from the properties subject to the conveyance
agreement. The Net Profits Royalties are not limited in term, although the
Trustee is required to sell such royalties prior to the Liquidation Date.
For any calendar quarter ending on or prior to December 31, 2002, the
Trust will receive additional royalty payments ('Support Payments') to the
extent it needs such payments to distribute $0.40 per Trust Unit per
quarter. Such Support Payments are limited to Santa Fe's remaining royalty
interest in the Wasson ODC Unit. If such Support Payments are received,
certain proceeds otherwise
5
payable to the Trust in subsequent quarters may be reduced to recoup the
amount of such Support Payments. The aggregate of the Support Payments, net
of any amounts recouped, will be limited to $20,000,000 on a revolving
basis. The royalty payment received by the Trust in the first quarter of
1994 included a Support Payment of $362,000, or $0.0575 per Trust Unit, and
the royalty payment received by the Trust in the second quarter of 1994
included a Support Payment of $506,000, or $0.08027 per Trust Unit.
(4) DISTRIBUTIONS TO TRUST UNIT HOLDERS
The Trust has received royalty payments and made distributions as
follows (in thousands of dollars, except as noted):
DISTRIBUTIONS
ROYALTY -------------------------
PAYMENT PER TRUST UNIT
RECEIVED(A) AMOUNT (IN DOLLARS)
----------- ------- --------------
1993
First quarter-------------------- 1,937 1,937 0.30753
Second quarter------------------- 2,990 2,940 0.46660
Third quarter-------------------- 3,193 3,118 0.49485
Fourth quarter------------------- 2,786 2,786 0.44218
----------- ------- --------------
Total year------------------- 10,906 10,781 1.71116
=========== ======= ==============
1994
First quarter (b)---------------- 2,575 2,520 0.40000
Second quarter (c)--------------- 2,670 2,520 0.40000
Third quarter(d)----------------- 2,670 2,520 0.40000
- ---------
(a) The payment received in the first quarter of 1993 relates to the
initial quarter of operations of the Trust and includes only two months
of operations with respect to the Royalty Properties. Payments received
in subsequent quarters relate to the three-month period preceding the
quarter in which the payment was received.
(b) Includes a Support Payment of $362,000, or $0.0575 per Trust Unit.
(c) Includes a Support Payment of $506,000, or $0.08027 per Trust Unit.
(d) To be paid on August 31, 1994 to Unit holders of record on August 15,
1994.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL; LIQUIDITY AND CAPITAL RESOURCES
The Trust is a passive entity with the Trustee's primary responsibility
being the collection and distribution of proceeds from the Wasson Royalties
and the Net Profits Royalties and the payment of Trust liabilities and
expenses (see Note 1 to the financial statements of the Trust).
The Trust's results of operations are dependent upon the difference
between the prices received for oil and gas and the costs of producing such
resources. Since, on an equivalent basis, a majority of the Trust's proved
reserves are crude oil, even relatively modest changes in crude oil prices
may significantly affect the Trust's revenues and results of operations.
Crude oil prices are subject to significant changes in response to
fluctuations in the domestic and world supply and demand and other market
conditions as well as the world political situation as it affects OPEC, the
Middle East and other producing countries. In addition, a substantial
portion of the Trust's revenues come from properties which produce sour
(i.e. high sulfur content) crude oil which sells at prices lower than
sweeter (i.e. low sulfur) crude oils.
Royalty income is recorded by the Trust when received, generally during
the quarter following the end of the quarter in which revenues are received
and costs and expenses are paid by Santa Fe. Cash proceeds from the Royalty
Properties may fluctuate from quarter to quarter due to the timing of
receipts and payments of revenues and expenses as well as changes in prices
and production volumes. The effect of changes in the sales price of crude
oil, which declined significantly in the latter part of 1993 and early 1994
and began to show improvement in the second quarter of 1994 is reflected in
the average prices with respect to the royalty payments received in the
first three quarters of 1994 (see Results of Operations).
For any calendar quarter ending on or prior to December 31, 2002, the
Trust will receive additional royalty payments ('Support Payments') to the
extent it needs such payments to distribute $0.40 per Trust Unit per
quarter. Such Support Payments are limited to Santa Fe's remaining royalty
interest in the Wasson ODC Unit. Certain proceeds otherwise payable to the
Trust in subsequent quarters may be reduced to recoup the amount of such
Support Payments. The aggregate amount of the Support Payments (net of any
amounts recouped) is limited to $20.0 million on a revolving basis.
Cash proceeds from the Royalty Properties in the first and second
quarters of 1994 included Support Payments of $362,000 and $506,000,
respectively, primarily due to lower realized oil prices and capital
expenditures incurred with respect to certain Royalty Properties, a
substantial portion of which related to the drilling of new wells.
Development activity on the Royalty Properties has increased from
$313,000 in 1993 to $782,000 in the first three quarters of 1994. Up to
$1,300,000 of additional capital expenditures for new wells are planned for
the fourth quarter of 1994 and the first quarter of 1995. In the third
quarter of 1994 a reserve of approximately $131,000 was established for
capital expenditures incurred but not yet paid and similar reserves may be
established in future quarters. In addition, as a result of this increased
level of drilling, and dependent on other factors such as sales volumes and
prices and the level of operating costs, Support Payments may be required
in these quarters to allow the Trust to make distributions of $0.40 per
quarter.
In addition to costs and expenses related to the Royalty Properties,
Trust administrative expenses are estimated to be approximately $666,000 in
1994, including approximately $459,000 for legal, accounting, engineering,
trustee and other administrative fees (including $87,000 in nonrecurring
listing application fees paid to the New York Stock Exchange) and a
$207,000 annual fee to Santa Fe. In addition, Santa Fe paid approximately
$379,000 in Trust formation costs of which $271,000 was recovered in 1993
and $108,000 was recovered in the first quarter of 1994.
7
RESULTS OF OPERATIONS
The following table reflects pertinent information with respect to the
cash proceeds from the Royalty Properties and the net distributable cash of
the Trust for the year 1993 and the first three quarters of 1994 (in
thousands of dollars, except as noted):
<TABLE>
<CAPTION>
1993 1994
--------------------------------------------------- -----------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER YEAR QUARTER(A) QUARTER(A) QUARTER(B)
--------- --------- --------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VOLUMES AND PRICES
Oil Volumes (Bbls)
Wasson ODC Royalty--------------- 8,400 41,600 41,600 41,600 133,200 67,576 90,670 51,800
Wasson Willard Royalty----------- 23,357 35,500 35,500 35,500 129,857 35,500 35,100 35,100
Net Profits Royalties------------ 52,855 76,106 92,332 84,635 305,928 79,472 89,924 85,613
Gas Volumes (Mcf)
Net Profits Royalties------------ 588,011 804,261 752,541 827,369 2,972,182 713,628 747,639 774,139
Oil Average Prices ($/Bbl)
Wasson ODC Royalty--------------- 17.83 17.62 17.39 15.35 16.85 13.94 13.01 16.13
Wasson Willard Royalty----------- 17.83 17.59 17.35 15.34 16.95 14.23 12.69 16.13
Net Profits Royalties------------ 19.82 17.30 16.74 15.28 17.01 14.18 11.83 12.93
Gas Average Prices ($/Mcf)
Net Profits Royalties------------ 1.77 2.00 1.98 1.92 1.93 1.93 1.90 1.84
CASH PROCEEDS AND
DISTRIBUTABLE CASH
Wasson ODC Royalty
Sales---------------------------- 150 733 724 638 2,245 942 1,180 835
Operating Expenses--------------- (70) (126) (126) (121) (443) (119) (122) (207)
-------- -------- -------- -------- ---------- -------- -------- --------
80 607 598 517 1,802 823 1,058 628
-------- -------- -------- -------- ---------- -------- -------- --------
Wasson Willard Royalty
Sales---------------------------- 416 625 616 544 2,201 505 445 566
Operating Expenses--------------- (59) (89) (88) (84) (320) (83) (79) (40)
-------- -------- -------- -------- ---------- -------- -------- --------
357 536 528 460 1,881 422 366 526
-------- -------- -------- -------- ---------- -------- -------- --------
Net Profits Royalties
Sales---------------------------- 2,089 2,925 3,037 2,887 10,938 2,509 2,490 2,530
Operating Expenses--------------- (437) (906) (765) (840) (2,948) (715) (914) (764)
Capital Expenditures------------- (119) (47) (57) (90) (313) (306) (278) (198)(c)
-------- -------- -------- -------- ---------- -------- -------- --------
1,533 1,972 2,215 1,957 7,677 1,488 1,298 1,568
-------- -------- -------- -------- ---------- -------- -------- --------
Total Royalties-------------------- 1,970 3,115 3,341 2,934 11,360 2,733 2,722 2,722
Administrative Fee to
Santa Fe------------------------- (33) (50) (50) (50) (183) (50) (52) (52)
Trust Formation Costs-------------- -- (75) (98) (98) (271) (108) -- --
-------- -------- -------- -------- ---------- -------- -------- --------
Payment Received(d)---------------- 1,937 2,990 3,193 2,786 10,906 2,575 2,670 2,670
Cash Advance From Santa Fe--------- -- -- 25 30 55 156 150 90
Repayment of Cash Advance from
Santa Fe------------------------- -- -- -- -- -- (55) (156) (150)
Cash Withheld for Trust
Expenses------------------------- -- (50) (100) (30) (180) (156) (144) (90)
-------- -------- -------- -------- ---------- -------- -------- --------
Distributable Cash----------------- 1,937 2,940 3,118 2,786 10,781 2,520 2,520 2,520
======== ======== ======== ======== ========== ======== ======== ========
Distributable Cash Per Trust Unit
(in dollars)--------------------- 0.30753 0.46660 0.49485 0.44218 1.71116 0.40000 0.40000 0.40000
======== ======== ======== ======== ========== ======== ======== ========
- ------------
<FN>
(a) The first quarter of 1994 includes a Support Payment of $362,000, or
$0.0575 per Trust Unit, and the second quarter of 1994 includes a
Support Payment of $506,000, or $0.08027 per Trust Unit. The Support
Payments were required primarily due to lower realized oil prices and
capital expenditures incurred with respect to certain Royalty
Properties, a substantial portion of which relates to the drilling of
new wells. Oil volumes with respect to the Wasson ODC Royalty for the
first and second quarters of 1994 include 25,976 barrels and 38,870
barrels, respectively, with respect to such Support Payments.
(b) The distribution for the third quarter of 1994 will be made on
August 31, 1994 to Unit holders of record on August 15, 1994.
(c) Includes $131,000 reserved for payment of capital expenditures
incurred and not yet paid.
(d) The payment received in the first quarter of 1993 relates to the
initial quarter of operations of the Trust and includes only two
months of operations with respect to the Royalty Properties.
Payments received in subsequent quarters relate to the
three-month period preceding the quarter in which the payment was
received.
</TABLE>
8
<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.
SANTA FE ENERGY TRUST
By TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, TRUSTEE
By RICHARD L. MELTON
RICHARD L. MELTON
EXECUTIVE VICE PRESIDENT
& TRUST OFFICER
Date: August 12, 1994
The Registrant, Santa Fe Energy Trust, has no principal executive
officer, principal financial officer, controller or principal accounting
officer, board of directors or persons performing similar functions.
Accordingly, no additional signatures are available and none have been
provided.
9
