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 MARCH 31, 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 May 9, 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 MARCH 31,
1994 1993
Royalty Income
ODC Royalty---------------------- $ 823 $ 80
Willard Royalty------------------ 422 357
Net Profits Royalty-------------- 1,488 1,533
Total Royalties---------------------- 2,733 1,970
Administrative Fee to Santa Fe------- (50) (33)
Trust Formation Costs---------------- (108) --
Advance from Santa Fe Energy
Resources, Inc.-------------------- 156 --
Repayment of Advance from Santa Fe
Energy Resources, Inc. ------------ (55) --
Cash Withheld for Trust Expenses----- (156) --
Distributable Cash------------------- $ 2,520 $ 1,937
Distributable Cash per Trust Unit (in
dollars)--------------------------- $ 0.40000 $ 0.30753
Trust Units Outstanding
(thousands)-------------------------- 6,300 6,300
STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
1994 1993
(UNAUDITED)
ASSETS
Investment in Royalty Interests,
at cost---------------------------- $ 87,276 $ 87,276
Less: Accumulated Amortization------- (12,318) (9,920)
$ 74,958 $ 77,356
LIABILITIES AND TRUST CORPUS
Advance from Santa Fe Energy
Resources, Inc.-------------------- $ 156 $ 55
Trust Corpus (6,300,000 Trust Units
issued and outstanding)------------ 74,802 77,301
$ 74,958 $ 77,356
The accompanying notes are an integral part of these financial statements.
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<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---------------------- 2,575
Cash Distributions----------------- (2,520)
Trust Expenses--------------------- (156)
Amortization of Royalty
Interests------------------------ (2,398)
Balance at March 31, 1994------------ $ 74,802
Balance at December 31, 1992--------- $ 87,277
Cash Proceeds---------------------- 1,937
Cash Distributions----------------- (1,937)
Amortization of Royalty
Interests------------------------ (1,702)
Balance at March 31, 1993------------ $ 85,575
The accompanying notes are an integral part of these financial statements.
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<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:
* 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;
* 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;
* 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;
* 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;
* 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;
* 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
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of any cash basis exploration and development expenditures. 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 quarter of 1994 net cash proceeds (before deducting Trust
expenses) exceeded cash distributions by $55,000, which amount was used to repay
the advance received from Santa Fe in 1993. In order to pay current Trust
expenses, Santa Fe advanced the Trust $156,000, which amount was due to Santa Fe
at March 31, 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 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
5
SANTA FE ENERGY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
$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 which will be received by the Trust in the
second quarter of 1994 will include 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):
ROYALTY DISTRIBUTIONS
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
(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. To be
paid on May 31, 1994 to Unit holders of record on May 16, 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, approximately eighty percent 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 world supply, economic conditions in the United States and elsewhere, the
world political situation as it affects OPEC, the Middle East (including the
current embargo of Iraqi crude oil from worldwide markets) and other producing
countries, the actions of OPEC and governmental regulation. 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. The sales price of crude oil dropped
significantly in the fourth quarter of 1993, as reflected in the average prices
with respect to the royalty payments for the first two 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. If such Support Payments are received, 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 quarter of 1994 included a
Support Payment of $362,000 and the cash proceeds from the Royalty Properties in
the second quarter of 1994 will include a Support Payment of $506,000, 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.
In addition to costs and expenses related to the Royalty Properties, Trust
administrative expenses are estimated to be approximately $457,000 in 1994,
including approximately $250,000 for legal, accounting, engineering, trustee and
other administrative fees 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 $108,000 was recovered in the first quarter of 1994.
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<PAGE>
RESULTS OF OPERATIONS
The following table reflects pertinent information with respect to the cash
proceeds from the Royalty Properties and the net distributable cash of the Trust
for the year 1993 and the first two quarters of 1994 (in thousands of dollars,
except as noted):
<TABLE>
<CAPTION>
1993 1994
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER YEAR QUARTER(A) QUARTER(A)
<S> <C> <C> <C> <C> <C> <C> <C>
VOLUMES AND PRICES
Oil Volumes (Bbls)
Wasson ODC Royalty--------------- 8,400 41,600 41,600 41,600 133,200 67,576 90,670
Wasson Willard Royalty----------- 23,357 35,500 35,500 35,500 129,857 35,500 35,100
Net Profits Royalties------------ 52,855 76,106 92,332 84,635 305,928 79,472 89,924
Gas Volumes (Mcf)
Net Profits Royalties------------ 588,011 804,261 752,541 827,369 2,972,182 713,628 747,639
Oil Average Prices ($/Bbl)
Wasson ODC Royalty--------------- 17.83 17.62 17.39 15.35 16.85 13.94 13.01
Wasson Willard Royalty----------- 17.83 17.59 17.35 15.34 16.95 14.23 12.69
Net Profits Royalties------------ 19.82 17.30 16.74 15.28 17.01 14.18 11.83
Gas Average Prices ($/Mcf)
Net Profits Royalties------------ 1.77 2.00 1.98 1.92 1.93 1.93 1.90
CASH PROCEEDS AND
DISTRIBUTABLE CASH
Wasson ODC Royalty
Sales---------------------------- 150 733 724 638 2,245 942 1,180
Expenses------------------------- (70) (126) (126) (121) (443) (119) (122)
80 607 598 517 1,802 823 1,058
Wasson Willard Royalty
Sales---------------------------- 416 625 616 544 2,201 505 445
Expenses------------------------- (59) (89) (88) (84) (320) (83) (79)
357 536 528 460 1,881 422 366
Net Profits Royalties
Sales---------------------------- 2,089 2,925 3,037 2,887 10,938 2,509 2,490
Expenses------------------------- (556) (953) (822) (930) (3,261) (1,021) (1,192)
1,533 1,972 2,215 1,957 7,677 1,488 1,298
Total Royalties-------------------- 1,970 3,115 3,341 2,934 11,360 2,733 2,722
Administrative Fee to
Santa Fe------------------------- (33) (50) (50) (50) (183) (50) (52)
Trust Formation Costs-------------- -- (75) (98) (98) (271) (108) --
Payment Received(b)---------------- 1,937 2,990 3,193 2,786 10,906 2,575 2,670
Cash Advance From Santa Fe--------- -- -- 25 30 55 156 150
Repayment of Cash Advance from
Santa Fe------------------------- -- -- -- -- -- (55) (156)
Cash Withheld for Trust
Expenses------------------------- -- (50) (100) (30) (180) (156) (144)
Distributable Cash----------------- 1,937 2,940 3,118 2,786 10,781 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
(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. The
distribution for the second quarter of 1994 will be made on May 31, 1994 to
Unit holders of record on May 16, 1994.
(b) 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>
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Volumes with respect to the Wasson ODC Royalty and the Wasson Willard
Royalty increased in periods subsequent to the first quarter of 1993 because (i)
the first quarter of 1993 represented the initial quarter of operations of the
Trust and included only two months of operations with respect to such royalties
and (ii) there was an increase in the maximum net quarterly production in
accordance with the royalty conveyance beginning in the second quarter of 1993.
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, related to the
Support Payments discussed previously. Volumes increased from the first quarter
of 1993 with respect to the Net Profits Royalties generally reflecting that the
first quarter of 1993 included only two months of operations with respect to
such properties.
9
<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: May 13, 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.
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