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, 1995
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 14, 1995 -- 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,
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Royalty Income
ODC Royalty .................... $ 921 $ 1,058 $ 2,258 $ 1,881
Willard Royalty ................ 466 366 852 788
Net Profits Royalty ............ 1,273 1,298 2,202 2,786
------- ------- ------- -------
Total Royalties .................... 2,660 2,722 5,312 5,455
Administrative Fee to Santa Fe ..... (54) (52) (106) (102)
Trust Formation Costs .............. -- -- -- (108)
Advance from Santa Fe Energy
Resources, Inc. .................. -- 150 90 306
Repayment of Advance from Santa Fe
Energy Resources, Inc. ........... (70) (156) (150) (211)
Cash Withheld for Trust Expenses ... (16) (144) (106) (300)
------- ------- ------- -------
Distributable Cash ................. $ 2,520 $ 2,520 $ 5,040 $ 5,040
======= ======= ======= =======
Distributable Cash per Trust Unit
(in dollars) ..................... 0.40000 0.40000 0.80000 0.80000
======= ======= ======= =======
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,
1995 1994
-------- -----------
(UNAUDITED)
ASSETS
Current Assets
Cash ......................................... $ 15 $ 90
-------- --------
Investment in Royalty Interests, at
cost ......................................... 87,276 87,276
Less: Accumulated Amortization ................. (24,682) (19,899)
-------- --------
62,594 67,377
-------- --------
$ 62,609 $ 67,467
======== ========
LIABILITIES AND TRUST CORPUS
Advance from Santa Fe Energy
Resources, Inc. .............................. $ 15 $ 75
Trust Corpus (6,300,000 Trust Units
issued and outstanding) ...................... 62,594 67,392
-------- --------
$ 62,609 $ 67,467
======== ========
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, 1994 ............................. $ 67,392
Cash Proceeds .......................................... 5,206
Cash Distributions ..................................... (5,040)
Trust Expenses ......................................... (181)
Amortization of Royalty
Interests ............................................ (4,783)
--------
Balance at June 30, 1995 ................................. $ 62,594
========
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
========
The accompanying notes are an integral part of these financial statements.
3
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
SANTA FE ENERGY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
of any cash basis exploration and development expenditures and amounts
reserved for any 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 1994 net cash proceeds (before deducting Trust expenses) exceeded
cash distributions by $447,000, a portion of which was used to repay advances
received from Santa Fe in 1993. In order to pay current Trust expenses, during
1994 Santa Fe advanced the Trust $471,000, of which $75,000 was due to Santa
Fe at December 31, 1994. During the first six months of 1995 net cash proceeds
(before deducting Trust expenses) exceeded cash distributions by $166,000, a
portion of which was used to repay advances received from Santa Fe. In order
to pay current Trust expenses, during the first six months of 1995 Santa Fe
advanced the Trust $90,000, of which $15,000 was due to Santa Fe at June 30,
1995.
(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
(two-thirds of such amount for the period ended December 31,
5
SANTA FE ENERGY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
1992). 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 $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 $362,100, or $0.0575 per Trust
Unit, the royalty payment received by the Trust in the second quarter of 1994
included a Support Payment of $505,700, or $0.08027 per Trust Unit and the
royalty payment received by the Trust in the first quarter of 1995 included a
Support Payment of $676,000, or $0.10740 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 AMOUNT (IN DOLLARS)
-------- ------- --------------
1994
First quarter (a)................ 2,575 2,520 0.40000
Second quarter(b)................ 2,670 2,520 0.40000
Third quarter.................... 2,670 2,520 0.40000
Fourth quarter................... 2,612 2,520 0.40000
------- ------- --------
10,527 10,080 1.60000
======= ======= ========
1995
First quarter(c)................. 2,600 2,520 0.40000
Second quarter................... 2,606 2,520 0.40000
---------
(a) Includes a Support Payment of $362,100, or $0.0575 per Trust Unit.
(b) Includes a Support Payment of $505,700, or $0.08027 per Trust Unit.
(c) Includes a Support Payment of $676,600, or $0.10740 per Trust Unit.
6
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, the 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. The sales price of crude oil, which began to show improvement in the
second calendar quarter of 1994, continued to show improvement through the
Trust's third quarter of 1995, as reflected in the average prices with respect
to the royalty payments (see Results of Operations). Since that time, however,
oil prices have declined and there can be no assurance that this price
improvement will continue.
Natural gas prices fluctuate due to weather conditions, the level of
natural gas in storage, the relative balance between supply and demand and
other economic factors. The Trust's average price for natural gas in the
second quarter of 1995 was $1.48 per Mcf, significantly lower than the Trust's
average price of $1.90 per Mcf for the comparable period of last year. The
average price of natural gas with respect to the cash proceeds to be received
in the third quarter of 1995 (representing sales proceeds received by Santa Fe
in the second quarter of 1995) continued to decline approximating $1.30 per
Mcf (excluding the effect of a gas balancing arrangement settlement received
during the period, see Results of Operations).
Proceeds from the Net Profits Royalties are net of capital expenditures
with respect to the exploration and development of the Net Profits Properties.
Capital expenditures with respect to the Net Profits Royalties for 1995 total
$1,331,000 through the end of the third quarter and are expected to be
approximately $1,800,000 for the full year.
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 such Support Payments (net of any amounts
recouped) is limited to $20.0 million on a revolving basis.
Cash proceeds in the first and second quarters of 1994 and the first
quarter of 1995 included Support Payments of $362,100, $505,700 and $676,600,
respectively, and the cash proceeds to be received in the third quarter of
1995 will include a Support Payment of $300,900. The Support Payments in the
first and second quarter of 1994 primarily resulted from lower realized oil
prices and increased capital expenditures principally related to the drilling
of new wells. The Support Payments in the first and third quarters of 1995
primarily reflect lower natural gas prices and a continuation of drilling
expenditures. As a result of the level of drilling expenditures and depending
on other factors such as sales volumes and prices and the level of operating
costs, Support Payments may be required in subsequent quarters to allow the
Trust to make distributions of $0.40 per quarter.
7
<PAGE>
RESULTS OF OPERATIONS
The following table reflects pertinent information with respect to the
cash proceeds from the Royalty Properties and the net distributable cash of
the Trust (in thousands of dollars, except as noted):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, THIRD
------------------------ ---------------------------- QUARTER
1995 1994 1995 1994 1995(A)
-------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
VOLUMES AND PRICES
Oil Volumes (Bbls)
Wasson ODC Royalty ......................... 63,800 90,670 158,479 158,246 81,022
Wasson Willard Royalty ..................... 33,800 35,100 68,900 70,600 33,800
Net Profits Royalties ...................... 79,866 89,924 153,690 169,396 73,511
Gas Volumes (Mcf)
Net Profits Royalties ...................... 628,493 747,639 1,326,525 1,461,267 795,705
Oil Average Prices ($/Bbl)
Wasson ODC Royalty ......................... 16.54 13.01 16.09 13.41 17.47
Wasson Willard Royalty ..................... 16.54 12.69 16.15 13.46 17.47
Net Profits Royalties ...................... 15.18 11.83 14.91 12.93 16.46
Gas Average Prices ($/Mcf)
Net Profits Royalties ...................... 1.48 1.90 1.50 1.92 1.19
CASH PROCEEDS AND DISTRIBUTABLE CASH
Wasson ODC Royalty
Sales ...................................... 1,055 1,180 2,549 2,122 1,416
Operating Expenses ......................... (134) (122) (291) (241) (137)
-------- -------- ---------- ---------- --------
921 1,058 2,258 1,881 1,279
-------- -------- ---------- ---------- --------
Wasson Willard Royalty
Sales ...................................... 559 445 1,113 950 591
Operating Expenses ......................... (93) (79) (261) (162) (94)
-------- -------- ---------- ---------- --------
466 366 852 788 497
-------- -------- ---------- ---------- --------
Net Profits Royalties
Sales ...................................... 2,176 2,490 4,348 4,999 2,180
Operating Expenses ......................... (706) (914) (1,435) (1,629) (747)
Capital Expenditures ....................... (197) (278) (711) (584) (620)
-------- -------- ---------- ---------- --------
1,273 1,298 2,202 2,786 813
-------- -------- ---------- ---------- --------
Total Royalties .............................. 2,660 2,722 5,312 5,455 2,589
Administrative Fee to Santa Fe ............... (54) (52) (106) (102) (54)
Trust Formation Costs ........................ -- -- -- (108) --
-------- -------- ---------- ---------- --------
Payment Received ............................. 2,606 2,670 5,206 5,245 2,535
Cash Advance From Santa Fe ................... -- 150 90 306 75
Repayment of Cash Advance from
Santa Fe ................................... (70) (156) (150) (211) (15)
Cash Withheld for Trust Expenses ............. (16) (144) (106) (300) (75)
-------- -------- ---------- ---------- --------
Distributable Cash ........................... 2,520 2,520 5,040 5,040 2,520
======== ======== ========== ========== ========
Distributable Cash Per Trust Unit
(in dollars) ............................... 0.40000 0.40000 0.80000 0.80000 0.40000
======== ======== ========== ========== ========
</TABLE>
------------
(a) Reflects proceeds received by Santa Fe in the second quarter of 1995. In
the third quarter of 1995 the Trust will receive a payment of $2,535,000
and on August 31, 1995 will make a cash distribution of $2,520,000, or
$0.40 per Trust Unit, to unitholders of record on August 14, 1995.
8
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.
Cash proceeds from the Wasson ODC Royalty for the second quarter of 1994
and the first six months of 1995 and 1994 and include Support Payments of
$505,700 or $0.0803 per Trust Unit, $676,600 or $0.1074 per Trust Unit and
$867,800 or $0.1377 per Trust Unit, respectively. Oil volumes for the Wasson
ODC Royalty for such periods included 38,870 barrels, 42,879 barrels and
64,846 barrels, respectively, attributable to the Support Payments. Cash
proceeds from the Wasson ODC Royalty to be received in the third quarter of
1995 include $300,900 or $0.0478 per Trust Unit attributable to Support
Payments and oil volumes for the Wasson ODC Royalty for that period include
17,222 barrels attributable to such payment.
Natural gas revenues for the third quarter of 1995 include $135,400
attributable to the settlement of a natural gas balancing arrangement and
natural gas volumes for the period include 173,582 Mcf attributable to such
settlement. Excluding the effect of the settlement, the Trust's average sales
price for natural gas for the third quarter of 1995 is approximately $1.30 per
Mcf.
Operating expenses for the Net Profits Royalties averaged $3.83 per barrel
of oil equivalent in the first six months of 1995 compared to $3.95 per barrel
of oil equivalent in the first six months of 1994.
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 /s/ MICHAEL J. ULRICH
Michael J. Ulrich
Vice President & Trust Officer
Date: August 14, 1995
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.
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TRUST'S
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15
<PP&E> 87,276
<DEPRECIATION> 24,682
<TOTAL-ASSETS> 62,609
<CURRENT-LIABILITIES> 15
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 62,594
<TOTAL-LIABILITY-AND-EQUITY> 62,609
<SALES> 0
<TOTAL-REVENUES> 5,402
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,040
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
