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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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11450
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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 10, 1995-- 6,300,000
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<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,
--------------------------------
1995 1994
----------- -----------
Royalty Income
ODC Royalty...................... $ 1,337 $ 823
Willard Royalty.................. 386 422
Net Profits Royalty.............. 929 1,488
----------- -----------
Total Royalties...................... 2,652 2,733
Administrative Fee to Santa Fe....... (52) (50)
Trust Formation Costs................ -- (108)
Advance from Santa Fe Energy
Resources, Inc..................... 90 156
Repayment of Advance from Santa Fe
Energy Resources, Inc. ............ (80) (55)
Cash Withheld for Trust Expenses..... (90) (156)
----------- -----------
Distributable Cash................... $ 2,520 $ 2,520
=========== ===========
Distributable Cash per Trust Unit
(in dollars)....................... 0.40000 0.40000
=========== ===========
Trust Units Outstanding
(thousands).......................... 6,300 6,300
=========== ===========
STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
1995 1994
---------- ------------
(UNAUDITED)
ASSETS
Current Assets
Cash............................... $ 81 $ 90
-------- --------
Investment in Royalty Interests, at
cost............................... 87,276 87,276
Less: Accumulated Amortization....... (22,459) (19,899)
-------- --------
64,817 67,377
-------- --------
$ 64,898 $ 67,467
======== ========
LIABILITIES AND TRUST CORPUS
Advance from Santa Fe Energy
Resources, Inc..................... $ 85 $ 75
Trust Corpus (6,300,000 Trust Units
issued and outstanding)............ 64,813 67,392
-------- --------
$ 64,898 $ 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............................................. 2,600
Cash Distributions........................................ (2,520)
Trust Expenses............................................ (99)
Amortization of Royalty
Interests............................................... (2,560)
---------
Balance at March 31, 1995................................... $ 64,813
=========
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
=========
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
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 quarter of 1995 net cash proceeds (before
deducting Trust expenses) exceeded cash distributions by $80,000, which was used
to repay advances received from Santa Fe. In order to pay current Trust
expenses, during the first quarter of 1995 Santa Fe advanced the Trust $90,000,
of which $85,000 was due to Santa Fe at March 31, 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, 1992). Such Support Payments
are limited to Santa Fe's remaining royalty interest in the Wasson
5
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
- ---------
(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, 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. The effect of changes
in the sales price of crude oil, which began to show improvement in the second
calendar quarter of 1994, continued to show improvement in 1995 as reflected in
the average prices with respect to the royalty payments (see Results of
Operations). 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 first
quarter of 1995 of $1.53 per Mcf is lower than any previous quarter.
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 quarter
of 1994 and the first quarter of 1995 included Support Payments of $362,100,
$505,700 and $676,600, respectively, primarily due to lower prices and capital
expenditures incurred with respect to certain Royalty Properties, a substantial
portion of which related to the drilling of new wells.
7
RESULTS OF OPERATIONS
The following table reflects pertinent information with respect to the cash
proceeds from the Royalty Properties and the net distributable cash of the Trust
(in thousands of dollars, except as noted):
THREE MONTHS
ENDED MARCH 31,
-------------------- SECOND QUARTER
1995 1994 1995(a)
------- ------- ---------------
VOLUMES AND PRICES
Oil Volumes (Bbls)
Wasson ODC Royalty............... 94,679 67,576 63,800
Wasson Willard Royalty........... 35,100 35,500 33,800
Net Profits Royalties............ 73,824 79,472 79,866
Gas Volumes (Mcf)
Net Profits Royalties............ 698,032 713,628 628,493
Oil Average Prices ($/Bbl)
Wasson ODC Royalty............... 15.78 13.94 16.54
Wasson Willard Royalty........... 15.77 14.23 16.54
Net Profits Royalties............ 14.62 14.18 15.18
Gas Average Prices ($/Mcf)
Net Profits Royalties............ 1.53 1.93 1.48
CASH PROCEEDS AND DISTRIBUTABLE CASH
Wasson ODC Royalty
Sales............................ 1,494 942 1,055
Operating Expenses............... (157) (119) (134)
------- ------- -------
1,337 823 921
------- ------- -------
Wasson Willard Royalty
Sales............................ 554 505 559
Operating Expenses............... (168) (83) (93)
------- ------- -------
386 422 466
------- ------- -------
Net Profits Royalties
Sales............................ 2,172 2,509 2,176
Operating Expenses............... (729) (715) (706)
Capital Expenditures............. (514) (306) (197)
------- ------- -------
929 1,488 1,273
------- ------- -------
Total Royalties.................... 2,652 2,733 2,660
Administrative Fee to Santa Fe..... (52) (50) (54)
Trust Formation Costs.............. -- (108) --
------- ------- -------
Payment Received................... 2,600 2,575 2,606
Cash Advance From Santa Fe......... 90 156 --
Repayment of Cash Advance from
Santa Fe......................... (80) (55) (70)
Cash Withheld for Trust Expenses... (90) (156) (16)
------- ------- -------
Distributable Cash................. 2,520 2,520 2,520
======= ======= =======
Distributable Cash Per Trust Unit
(in dollars)..................... 0.40000 0.40000 0.40000
======= ======= =======
- ---------
(a) In the second quarter of 1995 the Trust will receive a payment of $2,606,000
and on May 31, 1995 will make a cash distribution of $2,520,000, or $0.40
per Trust Unit, to unitholders of record on May 15, 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 first quarters of 1995
and 1994 include Support Payments of $676,600 or $0.1074 per Trust Unit, and
$362,100, or $0.0575 per Trust Unit, respectively. Oil volumes for the Wasson
ODC Royalty for such periods in 1995 and 1994 include 42,879 barrels and 38,870
barrels, respectively, attributable to the Support Payments. Operating expenses
for the Net Profits Royalties averaged $3.84 per barrel of oil equivalent
("BOE") in 1995 compared to $3.61 per BOE in 1994. Capital expenditures with
respect to the Net Profits Royalties totalled $514,000 in the first quarter of
1995 and are expected to be approximately $1,800,000 for the full year 1995.
The Support Payments in the first quarter of 1994 resulted primarily from
lower realized oil prices and increased capital expenditures. The Support
Payment in the first quarter of 1995 primarily reflects lower natural gas prices
and a continuation of drilling expenditures. As a result of the increased level
of drilling activities 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.
In the second quarter of 1995 the Trust will receive a payment of
$2,606,000 and on May 31, 1995 will make a cash distribution of $2,520,000, or
$0.40 per Trust Unit, to unitholders of record on May 15, 1995. The payment to
be received in the second quarter does not include a Support Payment.
9
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 MICHAEL J. ULRICH
----------------------------------
MICHAEL J. ULRICH
VICE PRESIDENT & TRUST OFFICER
Date: May 12, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81
<PP&E> 87,276
<DEPRECIATION> 22,459
<TOTAL-ASSETS> 64,898
<CURRENT-LIABILITIES> 85
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 64,813
<TOTAL-LIABILITY-AND-EQUITY> 64,898
<SALES> 0
<TOTAL-REVENUES> 2,742
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,520
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
