<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
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: 001-11335
DOMINION RESOURCES BLACK WARRIOR TRUST
(Exact name of registrant as specified in its charter)
Delaware 75-6461716
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Bank of America, N.A.
901 Main Street
17th Floor
Dallas, Texas 75202
(Address of principal executive offices)
(Zip code)
(214) 209-2400
(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 August 1, 2000:
7,850,000
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
Bank of America, N.A., as Trustee (the "Trustee") of Dominion Resources Black
Warrior Trust (the "Trust"), pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in annual financial statements have been condensed or omitted
pursuant to such rules and regulations, although the Trustee believes that the
disclosures are adequate to make the information presented not misleading. The
condensed financial statements of the Trust presented herein are unaudited
except for the balances as of December 31, 1999, and, therefore, are subject to
year-end adjustments. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and notes thereto in the
Trust's Report on Form 10-K for the year ended December 31, 1999. The December
31, 1999 balance sheet is derived from the audited balance sheet as of that
date. In the opinion of the Trustee, all adjustments consisting of normal
recurring adjustments necessary to present fairly the assets, liabilities and
trust corpus of the Trust as of June 30, 2000, the distributable income for the
three-month and six-month periods ended June 30, 2000 and 1999 and the changes
in trust corpus for the six-month periods ended June 30, 2000 and 1999, have
been included. The distributable income for the three and six months ended June
30, 2000 are not necessarily indicative of the distributable income for the full
year.
The condensed financial statements as of June 30, 2000 and for the
three-month and six-month periods ended June 30, 2000 and 1999 included herein
have been reviewed by Deloitte & Touche LLP, independent certified public
accountants, as stated in their report appearing herein.
-2-
<PAGE> 3
INDEPENDENT ACCOUNTANTS' REPORT
Unit Holders of Dominion Resources Black Warrior Trust and
Bank of America, N.A., Trustee
We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of Dominion Resources Black Warrior Trust as of June 30, 2000, and
the related condensed statements of distributable income for the three-month and
six-month periods ended June 30, 2000 and 1999 and changes in trust corpus for
the six-month periods ended June 30, 2000 and 1999. These condensed financial
statements are the responsibility of the Trustee.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
As described in Note 2 to the condensed financial statements, these condensed
financial statements have been prepared on a modified cash basis of accounting,
which is a comprehensive basis of accounting other than accounting principles
generally accepted in the United States of America.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
the basis of accounting described in Note 2.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the statement of assets, liabilities
and trust corpus of Dominion Resources Black Warrior Trust as of December 31,
1999, and the related statements of distributable income and changes in trust
corpus for the year then ended (not presented herein); and in our report dated
March 9, 2000, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed statement of assets, liabilities and trust corpus as of December 31,
1999, is fairly stated, in all material respects, in relation to the statement
of assets, liabilities and trust corpus from which it has been derived.
/s/ Deloitte & Touche LLP
Dallas, Texas
August 3, 2000
-3-
<PAGE> 4
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF ASSETS,
LIABILITIES AND TRUST CORPUS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 77,056 $ 124,159
Royalty interests in
gas properties (less accumulated
amortization of $85,245,834
at June 30, 2000 and
$80,544,548 at
December 31, 1999) 70,571,666 75,272,952
------------- -----------------
TOTAL ASSETS $ 70,648,722 $ 75,397,111
============= =================
LIABILITIES AND TRUST
---------------------
CORPUS
------
Trust administration expenses
payable $ 109,988 $ 123,931
Trust corpus -
7,850,000 units of
beneficial interest
authorized, issued and
outstanding 70,538,734 75,273,180
------------- -----------------
TOTAL LIABILITIES $ 70,648,722 $ 75,397,111
AND TRUST CORPUS ============= =================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
--------------------------------------------------------------------------------
-4-
<PAGE> 5
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For For
the Three the Three
Months Ended Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Royalty income $ 4,964,432 $ 4,659,953
Interest income 19,731 11,946
------------- -------------
4,984,163 4,671,899
General and administrative
expenses (168,303) (225,717)
------------- -------------
Distributable income $ 4,815,860 $ 4,446,182
============= =============
Distributable income
per unit (7,850,000 units) $ .61 $ .57
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
-5-
<PAGE> 6
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For For
the Six the Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Royalty income $ 10,378,339 $ 9,518,491
Interest income 39,150 25,005
------------- -------------
10,417,489 9,543,496
General and administrative
expenses (400,129) (425,283)
------------- -------------
Distributable income $ 10,017,360 $ 9,118,213
============= =============
Distributable income
per unit (7,850,000 units) $ 1.28 $ 1.16
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
-6-
<PAGE> 7
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For For
the Six the Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Trust corpus, beginning of period $ 75,273,180 $ 85,533,029
Amortization of royalty interests (4,701,286) (5,588,978)
Distributable income 10,017,360 9,118,213
Distributions to Unitholders (10,050,520) (9,166,710)
------------- -------------
Trust corpus, end of period $ 70,538,734 $ 79,895,554
------------- -------------
Distributions per unit (7,850,000 units) $ 1.28 $ 1.17
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
--------------------------------------------------------------------------------
-7-
<PAGE> 8
DOMINION RESOURCES BLACK WARRIOR TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. TRUST ORGANIZATION AND PROVISIONS
Dominion Resources Black Warrior Trust (the "Trust") was formed as a
Delaware business trust pursuant to the terms of the Trust Agreement of Dominion
Resources Black Warrior Trust (as amended, the "Trust Agreement") entered into
effective as of May 31, 1994, by and among Dominion Black Warrior Basin, Inc.,
an Alabama corporation (the "Company"), as grantor, Dominion Resources, Inc., a
Virginia corporation ("Dominion Resources"), and Bank of America, N.A., a
national banking association (the "Trustee"), and Mellon Bank (DE) National
Association, a national banking association (the "Delaware Trustee"), as
trustees. The trustees are independent financial institutions.
The Trust is a grantor trust formed to acquire and hold certain
overriding royalty interests (the "Royalty Interests") burdening proved natural
gas properties located in the Pottsville coal formation of the Black Warrior
Basin, Tuscaloosa County, Alabama (the "Underlying Properties") owned by the
Company. The Trust was initially created by the filing of its Certificate of
Trust with the Delaware Secretary of State on May 31, 1994. In accordance with
the Trust Agreement, the Company contributed $1,000 as the initial corpus of the
Trust. On June 28, 1994, the Royalty Interests were conveyed to the Trust by the
Company pursuant to the Overriding Royalty Conveyance (the "Conveyance") dated
effective as of June 1, 1994, from the Company to the Trust, in consideration
for all the 7,850,000 authorized units of beneficial interest ("Units") in the
Trust. The Company transferred its Units to its parent, Dominion Energy, Inc., a
Virginia corporation, which in turn transferred such Units to its parent,
Dominion Resources, which sold 6,850,000 of such Units to the public through
various underwriters (the "Underwriters") in June 1994 and an additional 54,000
Units through the Underwriters in August 1994 (collectively, the "Public
Offering"). The remaining 946,000 Units held by Dominion Resources were sold to
the public through certain of the Underwriters in June 1995 pursuant to
Post-Effective Amendment No. 1 to the Form S-3 Registration Statement relating
to the Units (the "Post-Effective Amendment"). All of the production
attributable to the Underlying Properties is from the Pottsville coal formation
and currently constitutes coal seam gas that entitles the owners of such
production, provided certain requirements are met, to tax credits pursuant to
Section 29 of the Internal Revenue Code of 1986, as amended, upon the production
and sale of such gas.
Royalty income to the Trust is attributable to the sale of depleting
assets. All of the Underlying Properties consist of producing properties.
Accordingly, the proved reserves attributable to the Underlying Properties are
expected to decline substantially during the term of the Trust and a portion of
each cash distribution made by the Trust will, therefore, be analogous to a
return of capital. Accordingly, cash yields attributable to the Units are
expected to decline over the term of the Trust.
The Trustee has all powers to collect and distribute proceeds received
by the Trust and to pay Trust liabilities and expenses. The Delaware Trustee has
only such powers as are set forth in the
-8-
<PAGE> 9
Trust Agreement or are required by law and is not empowered to otherwise manage
or take part in the management of the Trust. The Royalty Interests are passive
in nature and neither the Delaware Trustee nor the Trustee has any control over,
or any responsibility relating to, the operation of the Underlying Properties or
the Company's interest therein.
The Trust is subject to termination under certain circumstances
described in the Trust Agreement. Upon the termination of the Trust, all Trust
assets will be sold and the net proceeds therefrom distributed to Unitholders.
The only assets of the Trust, other than cash and temporary investments
being held for the payment of expenses and liabilities and for distribution to
Unitholders, are the Royalty Interests. The Royalty Interests consist of
overriding royalty interests burdening the Company's interest in the Underlying
Properties. The Royalty Interests generally entitle the Trust to receive 65
percent of the Company's Gross Proceeds (as defined below). The Royalty
Interests are non-operating interests and bear only expenses related to
property, production and related taxes (including severance taxes). "Gross
Proceeds" consist generally of the aggregate amounts received by the Company
attributable to the interests of the Company in the Underlying Properties from
the sale of coal seam gas at the central delivery points in the gathering system
for the Underlying Properties. The definitions, formulas and accounting
procedures and other terms governing the computation of the Royalty Interests
are set forth in the Conveyance.
Because of the passive nature of the Trust and the restrictions and
limitations on the powers and activities of the Trustee contained in the Trust
Agreement, the Trustee does not consider any of the officers and employees of
the Trustee to be "officers" or "executive officers" of the Trust as such terms
are defined under applicable rules and regulations adopted under the Securities
Exchange Act of 1934.
2. BASIS OF ACCOUNTING
The financial statements of the Trust are prepared on a modified cash
basis and are not intended to present financial position and results of
operations in conformity with accounting principles generally accepted in the
United States of America. Preparation of the Trust's financial statements on
such basis includes the following:
- Royalty income and interest income are recorded in the period in which
amounts are received by the Trust rather than in the period of
production and accrual, respectively.
- General and administrative expenses recorded are based on liabilities
paid and cash reserves established out of cash received.
- Amortization of the Royalty Interests is calculated on a
unit-of-production basis and charged directly to trust corpus when
revenues are received.
- Distributions to Unitholders are recorded when declared by the Trustee
(see Note 4).
The financial statements of the Trust differ from financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America because royalty
-9-
<PAGE> 10
income is not accrued in the period of production, general and administrative
expenses recorded are based on liabilities paid and cash reserves established
rather than on an accrual basis, and amortization of the Royalty Interests is
not charged against operating results.
The net amount of royalty interests in gas properties is limited to the
fair value of these assets, which would likely be measured by discounting
projected cash flows attributable to the Trust's gas reserves plus the estimated
future Section 29 credits for federal income tax purposes. If the net cost of
royalty interests in gas properties exceeds the aggregate of these amounts, an
impairment provision is recorded and charged to the trust corpus.
3. FEDERAL INCOME TAXES
The Trust is a grantor trust for Federal income tax purposes. As a
grantor trust, the Trust is not required to pay Federal or state income taxes.
Accordingly, no provision for income taxes has been made in these financial
statements.
Because the Trust is treated as a grantor trust, and because a
Unitholder is treated as directly owning an interest in the Royalty Interests,
each Unitholder will be taxed directly on his per Unit share of income
attributable to the Royalty Interests consistent with the Unitholder's method of
accounting and without regard to the taxable year or accounting method employed
by the Trust.
Production from coal seam gas wells drilled after December 31, 1979 and
prior to January 1, 1993, is believed to qualify for the Federal income tax
credit for producing nonconventional fuels under Section 29 of the Internal
Revenue Code. This tax credit is calculated annually based on each year's
qualified production through the year 2002. Such credit, based on a Unitholder's
pro rata share of qualifying production, may not reduce his regular tax
liability (after the foreign tax credit and certain other non-refundable
credits) below his alternative minimum tax. Any part of the Section 29 credit
not allowed for the tax year solely because of this limitation is subject to
certain carryover provisions. The Trustee is provided Section 29 tax credit
information related to Trust Properties by Dominion Resources, which is then
passed along to the Unitholders. In 1997, the Tax Court upheld the Internal
Revenue Service ("IRS") position that nonconventional fuel such as coal seam gas
does not qualify for the Section 29 credit unless the producer received a formal
certification from the Federal Energy Regulatory Commission ("FERC"). The FERC's
certification authority expired effective January 1, 1993. During March 1999,
the U.S. Court of Appeals for the 10th Circuit affirmed that decision. The
appeal (which is not binding as precedent) suggests that lack of a certification
from FERC may render the Section 29 credit unavailable in respect of production
from wells recompleted in a qualified formation after January 1, 1993, the date
that the FERC's certification authority expired (so that obtaining the requisite
determination for any such well was impossible). Many producers believe that
wells meeting the certification requirements are eligible for the Section 29
credits regardless of FERC certification. However, this position is not in
accordance with the IRS position, the decision of the Tax Court or the decision
of the U.S. Court of Appeals. On December 23, 1999, a petition was filed with
the FERC by a coalition of energy producers seeking reinstatement of the
certification process. By letter dated January 14, 2000, the U.S. Department of
Energy expressed its support of that petition and on January 27, 2000 the FERC
issued notice of proposed rulemaking by which its regulations would be amended
to reinstate certain regulations involving well category determinations for
Section 29 tax credits for certain well recompletions commenced after January 1,
1993. It is not yet possible to predict the likely outcome
-10-
<PAGE> 11
of this rulemaking process. The ability of the Trust to realize the carrying
value of its reserves and the ability of the Unitholders to utilize allocated
Section 29 credits could be in question with respect to any uncertificated
wells. In some cases the extent to which production from the various coal seam
gas wells in which the Trust holds an interest would qualify for the Section 29
credit under the standards applied in the appealed case is unclear, and the
Trustee has requested that Dominion Resources provide clarification and an
assessment of the effects of the foregoing, if any, on the Trust and its
Unitholders. Pending such clarification and assessment, or further developments,
or both, however, the availability of Section 29 credits to Unitholders in
respect of some portion of the Trust's coal seam gas production could be subject
to debate and challenge.
4. DISTRIBUTIONS TO UNITHOLDERS
The Trustee determines for each calendar quarter the amount of cash
available for distribution to Unitholders. Such amount (the "Quarterly
Distribution Amount") is an amount equal to the excess, if any, of the cash
received by the Trust attributable to production from the Royalty Interests
during such quarter, provided that such cash is received by the Trust on or
before the last business day prior to the 45th day following the end of such
calendar quarter, plus the amount of interest expected by the Trustee to be
earned on such cash proceeds during the period between the date of receipt by
the Trust of such cash proceeds and the date of payment to the Unitholders of
such Quarterly Distribution Amount, plus all other cash receipts of the Trust
during such quarter (to the extent not distributed or held for future
distribution as a Special Distribution Amount (as defined below) or included in
the previous Quarterly Distribution Amount) (which might include sales proceeds
not sufficient in amount to qualify for a special distribution as described in
the next paragraph and interest), over the liabilities of the Trust paid during
such quarter and not taken into account in determining a prior Quarterly
Distribution Amount, subject to adjustments for changes made by the Trustee
during such quarter in any cash reserves established for the payment of
contingent or future obligations of the Trust. An amount which is not included
in the Quarterly Distribution Amount for a calendar quarter because such amount
is received by the Trust after the last business day prior to the 45th day
following the end of such calendar quarter will be included in the Quarterly
Distribution Amount for the next calendar quarter. The Quarterly Distribution
Amount for each quarter will be payable to Unitholders of record on the 60th day
following the end of such calendar quarter unless such day is not a business day
in which case the record date is the next business day thereafter. The Trustee
will distribute the Quarterly Distribution Amount for each calendar quarter on
or prior to 70 days after the end of such calendar quarter to each person who
was a Unitholder of record on the record date for such calendar quarter.
The Royalty Interests may be sold under certain circumstances and will
be sold following termination of the Trust. A special distribution will be made
of undistributed net sales proceeds and other amounts received by the Trust
aggregating in excess of $10 million (a "Special Distribution Amount"). The
record date for a Special Distribution Amount will be the 15th day following the
receipt by the Trust of amounts aggregating a Special Distribution Amount
(unless such day is not a business day, in which case the record date will be
the next business day thereafter) unless such day is within 10 days or less
prior to the record date for a Quarterly Distribution Amount, in which case the
record date will be the date that is established for the next Quarterly
Distribution Amount. Distribution to Unitholders of a Special Distribution
Amount will be made no later than 15 days after the Special Distribution Amount
record date.
-11-
<PAGE> 12
Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of
Operations.
The Trust makes quarterly cash distributions to holders of units of
beneficial interest ("Units") in the Trust ("Unitholders"). The only assets of
the Trust, other than cash and cash equivalents being held for the payment of
expenses and liabilities and for distribution to Unitholders, are certain
overriding royalty interests (the "Royalty Interests") burdening certain proved
natural gas properties located in the Pottsville coal formation of the Black
Warrior Basin, Tuscaloosa County, Alabama (the "Underlying Properties"). The
Royalty Interests owned by the Trust burden the interest in the Underlying
Properties that is owned by Dominion Black Warrior Basin, Inc. (the "Company"),
an indirect wholly owned subsidiary of Dominion Resources, Inc. ("Dominion
Resources").
Production from coal seam gas wells drilled after December 31, 1979 and
prior to January 1, 1993, is believed to qualify for the Federal income tax
credit for producing nonconventional fuels under Section 29 of the Internal
Revenue Code. This tax credit is calculated annually based on each year's
qualified production through the year 2002. Such credit, based on a Unitholder's
pro rata share of qualifying production, may not reduce his regular tax
liability (after the foreign tax credit and certain other non-refundable
credits) below his alternative minimum tax. Any part of the Section 29 credit
not allowed for the tax year solely because of this limitation is subject to
certain carryover provisions. The Trustee is provided Section 29 tax credit
information related to Trust Properties by Dominion Resources, which is then
passed along to the Unitholders. In 1997, the Tax Court upheld the Internal
Revenue Service ("IRS") position that nonconventional fuel such as coal seam gas
does not qualify for the Section 29 credit unless the producer received a formal
certification from the Federal Energy Regulatory Commission ("FERC"). The FERC's
certification authority expired effective January 1, 1993. During March 1999,
the U.S. Court of Appeals for the 10th Circuit affirmed that decision. The
appeal (which is not binding as precedent) suggests that lack of a certification
from FERC may render the Section 29 credit unavailable in respect of production
from wells recompleted in a qualified formation after January 1, 1993, the date
that the FERC's certification authority expired (so that obtaining the requisite
determination for any such well was impossible). Many producers believe that
wells meeting the certification requirements are eligible for the Section 29
credits regardless of FERC certification. However, this position is not in
accordance with the IRS position, the decision of the Tax Court or the decision
of the U.S. Court of Appeals. On December 23, 1999, a petition was filed with
the FERC by a coalition of energy producers seeking reinstatement of the
certification process. By letter dated January 14, 2000, the U.S. Department of
Energy expressed its support of that petition and on January 27, 2000 the FERC
issued notice of proposed rulemaking by which its regulations would be amended
to reinstate certain regulations involving well category determinations for
Section 29 tax credits for certain well recompletions commenced after January 1,
1993. It is not yet possible to predict the likely outcome of this rulemaking
process. The ability of the Trust to realize the carrying value of its reserves
and the ability of the Unitholders to utilize allocated Section 29 credits could
be in question with respect to any uncertificated wells. In some cases the
extent to which production from the various coal seam gas wells in which the
Trust holds an interest would qualify for the Section 29 credit under the
standards applied in the appealed case is unclear, and the Trustee has requested
that Dominion Resources provide clarification and an assessment of the effects
of the foregoing, if any, on the Trust and its Unitholders. Pending such
clarification and assessment, or further developments, or both, however, the
availability of Section 29 credits to Unitholders in respect of some portion of
the Trust's coal seam gas production could be subject to debate and challenge.
-12-
<PAGE> 13
Distributable income of the Trust consists of the excess of royalty
income plus interest income over the organizational and administrative expenses
of the Trust. Upon receipt by the Trust, royalty income is invested in
short-term investments in accordance with the Trust Agreement of Dominion
Resources Black Warrior Trust (as amended, the "Trust Agreement") until its
subsequent distribution to Unitholders.
The amount of distributable income of the Trust for any quarter may
differ from the amount of cash available for distribution to Unitholders in such
quarter due to differences in the treatment of the expenses of the Trust in the
determination of those amounts. The financial statements of the Trust are
prepared on a modified cash basis pursuant to which the expenses of the Trust
are recognized when they are paid or reserves are established for them.
Consequently, the reported distributable income of the Trust for any quarter is
determined by deducting from the income received by the Trust the amount of
expenses paid by the Trust during such quarter. The amount of cash available for
distribution to Unitholders is determined as adjusted for changes in reserves
for unpaid liabilities in accordance with the provisions of the Trust Agreement.
(See Note 4 to the financial statements of the Trust appearing elsewhere in this
Form 10-Q for additional information regarding the determination of the amount
of cash available for distribution to Unitholders.)
Three and Six Months Ended June 30, 2000 Compared To Three and Six Months Ended
June 30, 1999
The Trust's Royalty Interests consist of overriding royalty interests
burdening the Company's interest in the Underlying Properties. The Royalty
Interests generally entitle the Trust to receive 65 percent of the Company's
Gross Proceeds (as defined below) during the preceding calendar quarter. The
Royalty Interests are non-operating interests and bear only expenses related to
property, production and related taxes (including severance taxes). "Gross
Proceeds" consist generally of the aggregate amounts received by the Company
attributable to the interests of the Company in the Underlying Properties from
the sale of coal seam gas at the central delivery points in the gathering system
for the Underlying Properties. The definitions, formulas and accounting
procedures and other terms governing the computation of the Royalty Interests
are set forth in the Overriding Royalty Conveyance from the Company to the
Trust.
The Trust received royalty income amounting to $4,964,432 during the
second quarter of 2000 compared to $4,659,953 during the second quarter of 1999.
This revenue was derived from the receipt of cash on production of 2,109 Mmcf at
an average price received of $2.35 per mcf after deducting production taxes of
$293,868 compared to 2,371 Mmcf with an average price of $1.97 per mcf after
deducting production taxes of $270,081 in the second quarter of 1999. These
prices are influenced by many factors such as seasonal temperatures, domestic
demand and other factors that are beyond the control of the Trustee. The
decrease in production is attributed to normal depletion of existing available
reserves. Royalty income for the six months ended June 30, 2000 was $10,378,339
as compared to $9,518,491 for the same period in 1999. This revenue was derived
from the receipt of cash on production of 4,314 Mmcf at an average price
received of $2.40 per mcf after deducting production taxes of $620,463, compared
to 4,877 Mmcf at an average price received of $1.95 per mcf after deducting
production taxes of $546,150 for the same period in 1999.
Interest income during the second quarter of 2000 amounted to $19,731 as
compared to $11,946 for the comparable period in 1999. This difference was
primarily due to the Trust having
-13-
<PAGE> 14
more funds available for investment. Interest income for the six months ended
June 30, 2000 was $39,150 compared to $25,005 for the comparable period in 1999.
This difference is also a result of the Trust having more funds available for
investment.
Administrative expenses during the second quarter of 2000 amounted to
$168,303 compared to $225,717 in the comparable period in 1999 due primarily to
the timing of payments of certain expenses. Administrative expenses for the six
months ended June 30, 2000 were $400,129 as compared to $425,283 for the same
period in 1999. For this period, these expenses were primarily related to
administrative services provided by Dominion Resources and the Trustee and
Mellon Bank (DE) National Association, a national banking association, during
the period.
Distributable income for the second quarter of 2000 was $4,815,860 or
$.61 per Unit compared to distributable income for the second quarter of 1999 of
$4,446,182 or $.57 per Unit. Distributable income for the six months ended June
30, 2000 was $10,017,360 as compared to $9,118,213 for the same period in 1999.
The Trust made a distribution on June 9, 2000 of $.605743 per Unit compared to a
distribution of $.567476 per Unit made during the second quarter of 1999.
Forward-Looking Statements
This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this Form 10-Q, including,
without limitation, statements contained in this "Trustee's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the Trust's
financial position and industry conditions, are forward-looking statements.
Although the Trustee believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Trust invests in no derivative financial instruments, and has
no foreign operations or long-term debt instruments. The Trust is a passive
entity and other than the Trust's ability to periodically borrow money as
necessary to pay expenses, liabilities and obligations of the Trust that cannot
be paid out of cash held by the Trust, the Trust is prohibited from engaging in
borrowing transactions. The amount of any such borrowings is unlikely to be
material to the Trust. The Trust periodically holds short term investments
acquired with funds held by the Trust pending distribution to Unitholders and
funds held in reserve for the payment of Trust expenses and liabilities. Because
of the short-term nature of these borrowings and investments and certain
limitations upon the types of such investments which may be held by the Trust,
the Trustee believes that the Trust is not subject to any material interest rate
risk. The Trust does not engage in transactions in foreign currencies which
could expose the Trust or Unitholders to any foreign currency related market
risk.
-14-
<PAGE> 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
-15-
<PAGE> 16
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.
DOMINION RESOURCES BLACK WARRIOR TRUST
By: BANK OF AMERICA, N.A., TRUSTEE
By: /s/ Ron E. Hooper
-----------------------------------
Ron E. Hooper
Vice President
Date: August 9, 2000
(The Trust has no directors or executive officers.)
-16-
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
