<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Amendment No. 1
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number: 1-11608
WILLIAMS COAL SEAM GAS ROYALTY TRUST
(Exact name of registrant as specified in its charter)
Delaware 75-6437433
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Trust Division
NationsBank of Texas, N.A.
NationsBank Plaza
901 Main Street
Suite 1700
Dallas, Texas 75202
(Address of principal executive offices)
(Zip code)
(214) 508-2364
(Registrant's telephone number, including area code)
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
----- -----
Number of units of beneficial interest outstanding at July 31, 1997:
9,700,000.
<PAGE>
The Williams Coal Seam Gas Royalty Trust's Form 10-Q for the quarter ended
June 30, 1997 is amended to replace the text of "Item 1. -- Legal Proceedings"
to read in its entirety as follows:
Item 1. Legal Proceedings
The following discussion concerns a material development in a legal
matter which may effect the Trust and which occurred subsequent to
June 30, 1997.
Southern Ute Litigation. As previously reported in the Public Offering
Prospectus, each of the Trust's prior Annual Reports on Form 10-K as filed with
the SEC, and most recently in the Trust's 1996 Annual Report on Form 10-K (the
"1996 Annual Report") under "Item 2--The Royalty Interest--Title to Properties--
Southern Ute Litigation," WPC has been named as a defendant in a lawsuit brought
by the Southern Ute Indian Tribe (the "Tribe") which, among other things,
contests ownership rights in certain coal seam gas producing properties,
including a portion of the Farmout Properties in which WPC owns a net profits
interest. A portion of the revenues received by WPC with regard to the Farmout
Properties is paid to the Trust as a component of the NPI. The following
information is included herein for the purpose of updating the disclosure
provided in the 1996 Annual Report as a result of the July 16, 1997 opinion
rendered by the United States Court of Appeals for the Tenth Circuit (the "Court
of Appeals") and should be read in conjunction with the discussion of the
litigation provided in the 1996 Annual Report. Capitalized terms used and not
otherwise defined in the following discussion are used with the meanings given
to such terms in the 1996 Annual Report.
On December 31, 1991, the Tribe filed a lawsuit in the United States
District Court for the District of Colorado (the "District Court") against WPC,
Amoco Production Company and other major gas producers and affected parties in
the San Juan Basin area (collectively, the "Defendant Class") alleging that
certain coal strata and constituents within that strata (including coal seam
gas) were reserved by the United States, then granted to the Tribe for the
Tribe's perpetual benefit and ownership. The Tribe alleges that coal seam gas
from the coal strata is and has been wrongfully extracted by members of the
Defendant Class. The Tribe is seeking a declaration that it owns a beneficial
interest in the coal seam gas and that the extraction of such gas without Tribal
consent is an unlawful trespass. In addition to a declaration of ownership of
the gas, the Tribe is seeking compensation for the value of coal seam gas
heretofore extracted and certain other remedies.
The pending litigation involves approximately 1,745 gross acres comprising
a portion of the Farmout Properties. Two Tribe leases covering approximately
3,600 gross acres included in the Farmout Properties are not covered by the
pending litigation, but could be the subject of future litigation.
WPC, together with the other members of the Defendant Class, is vigorously
defending the lawsuit. On September 13, 1994, the District Court issued a
memorandum opinion and order in the litigation granting the motion for summary
judgment filed by the Defendant Class on the question of ownership of the coal
seam gas. The District Court ruled that the U.S. Congress did not reserve the
coal seam gas in the Coal Lands Acts of 1909 and 1910, and denied the Tribe's
claim of equitable ownership of the coal seam gas. The Tribe appealed the
2
<PAGE>
order to the Court of Appeals which issued a July 16, 1997 opinion reversing the
District Court and holding that coal seam gas was "an integral component of
coal" and had therefore been vested in the Tribe as owners of the coal resource.
The Court of Appeals remanded the matter to the District Court for further
proceedings consistent with its decision. Amoco Production Company, the class
representative for the Defendant Class, has indicated its intent to seek review
of the Court of Appeals' decision. In the event further review is denied, the
District Court will be in the position to adjudicate the Defendant Class'
affirmative defenses to the Tribe's claims.
WPC has agreed to indemnify the Trust from and against any loss, charge or
liability as may arise in respect of the Underlying Properties or the Royalty
Interests, in connection with the defense of such lawsuit and all legal costs
the Trust might incur if the Trust is named as a defendant in such litigation.
WPC's indemnity with respect to the Farmout Properties is limited to its
retained interest share of any settlement costs that may reduce the revenue
stream it receives from its 35 percent net profits interest in the Farmout
Properties. With respect to this litigation, in the event of a settlement or
issuance of a final non-appealable court decision either of which results in a
determination that WPC has no right to produce or receive proceeds from coal
seam gas from the properties in question, WPC agreed, pursuant to a provision of
the Conveyance, to pay to the Trust, in addition to the indemnification
described above, for distribution to then current Unitholders as a return of a
portion of the original purchase price paid for the Units in the Public
Offering, an amount equal to (a) the product of (i) $1.47 per Mcf times (ii) the
estimated reserves in the October 1, 1992 Reserve Report attributable to the
interest of the Trust in the Farmout Properties subject to such dispute, less
(b) the aggregate cash distributions paid by the Trust prior to the date of such
determination and less (c) the tax benefits, if any, available to the
Unitholders and attributable to the portion of the interest of the Trust in the
Farmout Properties so purchased.
The Trustee previously reported that it had been informed by Williams that
the aggregate cash distributions and tax benefits attributable to such interests
heretofore received by the Trust already exceed the calculated amount under (a)
of the formula in the preceding paragraph, and consequently, that no amounts
would be payable to the Trust under the purchase price adjustment provision
described above. By letter dated September 3, 1997, Williams informed the
Trustee that a mistake had been made in connection with the calculation under
this formula and therefore the information previously provided to the Trustee
was erroneous. Williams has advised the Trustee that, based on revenues and tax
credits through June 30, 1997, approximately $1.4 million remains payable to the
Trust pursuant to the above formula in the event of a final disposition of this
matter adverse to WPC's title claims.
However, the amount of this potential payment by WPC to the Trust continues
to decline according to the aforementioned formula as cash distributions and tax
benefits attributable to the Farmout Properties in question are received by the
Trust. Consequently, Unitholders may eventually expect to receive, if anything,
substantially less than the $1.4 million payable by WPC as of June 30, 1997
regardless of the resolution of this litigation. In the event that the eventual
result of this litigation is a loss or diminution of WPC's interest in the
Farmout Properties in question, future distributions to the Trust may decrease
correspondingly.
The Trustee makes no prediction as to the ultimate resolution of this
litigation or as to the likely effect, if any, that such resolution may have
upon the Trust or its Unitholders.
3
<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.
WILLIAMS COAL SEAM GAS ROYALTY TRUST
By: NATIONSBANK OF TEXAS, N.A., Trustee
By: /s/ Ron Hooper
------------------------------------------
Ron Hooper
Vice President and Administrator
(The Trust has no directors or executive officers.)
Date: September 18, 1997
4
