Attached files
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EX-32.1 - EX-32.1 - TIDELANDS ROYALTY TRUST B | d84158exv32w1.htm |
EX-31.1 - EX-31.1 - TIDELANDS ROYALTY TRUST B | d84158exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
OR
o | 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 000-08677
Tidelands Royalty Trust B
(Exact name of registrant as specified in its charter)
Texas | 75-6007863 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
c/o The Corporate Trustee:
U.S. Trust, Bank of America Private Wealth Management
P. O. Box 830650, Dallas, Texas 75283-0650
(Address of principal executive offices)
(Zip Code)
U.S. Trust, Bank of America Private Wealth Management
P. O. Box 830650, Dallas, Texas 75283-0650
(Address of principal executive offices)
(Zip Code)
(800) 985-0794
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
(Former name, former address and former fiscal year,
if changed since last report)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
Indicate number of units of beneficial interest outstanding as of the latest practicable date:
As of August 11, 2011, Tidelands Royalty Trust B had 1,386,375 units of beneficial interest
outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
As of June 30, 2011 and December 31, 2010
As of June 30, 2011 and December 31, 2010
December 31, | ||||||||
June 30, 2011 | 2010 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,028,157 | $ | 1,299,734 | ||||
Oil, gas and other mineral properties |
2 | 2 | ||||||
Federal income tax refundable |
12,734 | 12,734 | ||||||
Total assets |
$ | 1,040,893 | $ | 1,312,470 | ||||
LIABILITIES AND TRUST CORPUS |
||||||||
Current liabilities: |
||||||||
Income distributable to unitholders |
$ | 276,628 | $ | 507,437 | ||||
Total current liabilities |
$ | 276,628 | $ | 507,437 | ||||
Trust corpus authorized 1,386,525 units
of beneficial interest,
issued 1,386,375 at nominal value |
$ | 764,265 | $ | 805,033 | ||||
$ | 1,040,893 | $ | 1,312,470 | |||||
See accompanying notes to condensed consolidated financial statements.
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Income: |
||||||||||||||||
Oil and gas royalties |
$ | 272,041 | $ | 525,991 | $ | 688,354 | $ | 1,208,588 | ||||||||
Interest income |
| | | | ||||||||||||
Total income |
$ | 272,041 | $ | 525,991 | $ | 688,354 | $ | 1,208,588 | ||||||||
Expenses: |
||||||||||||||||
General and
administrative |
$ | 74,038 | $ | 68,471 | $ | 139,703 | $ | 112,573 | ||||||||
Distributable income
before Federal income
taxes |
198,003 | 457,520 | 548,651 | 1,096,015 | ||||||||||||
Federal income taxes
of subsidiary |
| 1,200 | | 3,200 | ||||||||||||
Distributable income |
$ | 198,003 | $ | 456,320 | $ | 548,651 | $ | 1,092,815 | ||||||||
Distributable income
per unit |
$ | 0.14 | $ | 0.33 | $ | 0.40 | $ | 0.79 | ||||||||
Distributions per unit |
$ | 0.20 | $ | 0.44 | $ | 0.43 | $ | 0.89 | ||||||||
Units outstanding |
1,386,375 | 1,386,375 | 1,386,375 | 1,386,375 |
See accompanying notes to condensed consolidated financial statements.
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Trust corpus, beginning of period |
$ | 805,032 | $ | 937,904 | ||||
Distributable income |
548,651 | 1,092,815 | ||||||
Distributions to unitholders |
(589,419 | ) | (1,230,294 | ) | ||||
Trust corpus, end of period |
$ | 764,264 | $ | 800,425 | ||||
See accompanying notes to condensed consolidated financial statements.
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Table of Contents
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
June 30, 2011
(Unaudited)
Note 1. Accounting Policies
The financial statements include the financial statements of Tidelands Royalty Trust B (the
Trust) and Tidelands Royalty B Corporation, its wholly-owned subsidiary (Tidelands
Corporation, and collectively with the Trust, Tidelands). The financial statements are
condensed and consolidated and should be read in conjunction with Tidelands Annual Report on Form
10-K for the year ended December 31, 2010. The financial statements included herein are unaudited,
but in the opinion of the trustee of the Trust, they include all adjustments necessary for a fair
presentation of the results of operations for the periods indicated. Operating results for the
interim periods reported herein are not necessarily indicative of the results that may be expected
for the year ending December 31, 2011.
Note 2. Basis of Accounting
The financial statements of Tidelands are prepared on the modified cash basis method 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 (GAAP). Under the modified cash
basis method:
| Royalty income is recognized in the month when received by Tidelands. | ||
| Tidelands expenses (which include accounting, legal, and other professional fees, trustees fees and out-of-pocket expenses) are recorded on an accrual basis. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary. | ||
| Distributions to unitholders are recognized when declared by the trustee of the Trust. |
The financial statements of Tidelands differ from financial statements prepared in conformity
with GAAP because of the following:
| Royalty income is recognized in the month received rather than in the month of production. | ||
| Reserves may be established for contingencies that would not be recorded under GAAP. |
This comprehensive basis of accounting corresponds to the accounting principles permitted for
royalty trusts by the U.S. Securities and Exchange Commission (the SEC), as specified by Staff
Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.
Note 3. Distributable Income
The Trusts Indenture, as amended (the Indenture), provides that the trustee is to
distribute all cash in the Trust, less an amount reserved for payment of accrued liabilities and
estimated future expenses, to unitholders of record on the last business day of March, June,
September and December of each year. Such payments are to be made within 15 days after the record
date.
As stated under Accounting Policies above, the financial statements in this Quarterly Report
on Form 10-Q are the condensed and consolidated account balances of the Trust and Tidelands
Corporation. However, distributable income is paid from the account balances of the Trust.
Distributable income is comprised of (i) royalties from offshore Texas leases owned directly by the
Trust, (ii) 95% of the overriding royalties received by Tidelands Corporation from offshore
Louisiana leases, which are retained by and delivered to the Trust on a quarterly basis, (iii)
dividends paid to the Trust by Tidelands Corporation, less (iv) administrative expenses incurred by
the Trust. Distributions fluctuate from quarter to quarter due to changes in oil and natural gas
prices and production quantities.
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Note 4. Subsequent Event
The Trust declared a quarterly cash distribution to the holders of its units of beneficial
interest of $0.199804 per unit, which it paid on July 14, 2011 to unitholders of record on June 30,
2011.
Subsequent events have been evaluated through the date of the Quarterly Report on Form 10-Q in
which these financial statements are included.
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Table of Contents
Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations
Organization
The Trust is a royalty trust that was created on June 1, 1954 under the laws of the State of
Texas. U.S. Trust, Bank of America Private Wealth Management serves as corporate trustee (the
Trustee). The Indenture provides that the term of the Trust will expire on April 30, 2021,
unless extended by the vote of the holders of a majority of the outstanding units of beneficial
interest. The Trust is not permitted to engage in any business activity because it was organized
for the sole purpose of providing an efficient, orderly and practical means for the administration
and liquidation of rights to interests in certain oil, natural gas or other mineral leases obtained
by Gulf Oil Corporation (Gulf) in a designated area of the Gulf of Mexico. These rights are
evidenced by a contract between the Trusts predecessors and Gulf dated April 30, 1951 (the 1951
Contract), which is binding upon the assignees of Gulf. As a result of various transactions that
have occurred since 1951, the Gulf interests that were subject to the 1951 Contract now are held by
Chevron U.S.A., Inc. (Chevron), which is a subsidiary of Chevron Corporation, and its assignees.
The Trust holds title to interests in properties subject to the 1951 Contract that are situated
offshore of Texas.
The Trusts wholly-owned subsidiary, Tidelands Corporation, holds title to interests in
properties subject to the 1951 Contract that are situated offshore of Louisiana because at the time
the Trust was created, trusts could not hold these interests under Louisiana law. Tidelands
Corporation is prohibited from engaging in a trade or business and does only those things necessary
for the administration and liquidation of its properties.
Tidelands rights are generally referred to as overriding royalty interests in the oil and
natural gas industry. An overriding royalty interest is created by an assignment by the owner of a
working interest in an oil or natural gas lease. The royalty rights associated with an overriding
royalty interest terminate when the underlying lease terminates. All production and marketing
functions are conducted by the working interest owners of the leases. Income from the overriding
royalties is paid to Tidelands either (i) on the basis of the selling price of oil, natural gas and
other minerals produced, saved or sold, or (ii) at the value at the wellhead as determined by
industry standards, when the selling price does not reflect the value at the wellhead.
The Trustee assumes that some units of beneficial interest are held by middlemen, as such term
is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint
owners, and brokers holding an interest for a customer in street name). Therefore, the Trustee
considers the Trust to be a widely held fixed investment trust (WHFIT) for U.S. Federal income
tax purposes. Accordingly, the Trust will provide tax information in accordance with applicable
U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT.
The representative of the Trust that will provide the required information is U.S. Trust, Bank of
America Private Wealth Management, and the contact information for the representative is as
follows:
U.S. Trust, Bank of America Private Wealth Management
P.O. Box 830650
Dallas, Texas 75283-0650
Telephone number: (800) 985-0794
P.O. Box 830650
Dallas, Texas 75283-0650
Telephone number: (800) 985-0794
Each unitholder should consult his or her own tax advisor for compliance matters.
Liquidity and Capital Resources
Due to the limited purpose of the Trust as stated in the Trusts Indenture, there is no
requirement for capital. The Trusts only obligation is to distribute to unitholders the
distributable income actually collected. As an administrator of oil and natural gas royalty
properties, the Trust collects royalties monthly, pays administration expenses and disburses all
net royalties collected to its unitholders each quarter.
The Trusts Indenture (and Tidelands Corporations charter and by-laws) expressly prohibits
the operation of any kind of trade or business. The Trusts oil and natural gas properties are
depleting assets and are not being replaced due to the prohibition against these investments.
These restrictions, along with other factors, allow the Trust to be treated as a grantor trust. As
a grantor trust, all income and deductions for state and U.S. Federal tax purposes generally flow
through to each individual unitholder. In May 2006, the State of Texas passed legislation to
implement a franchise or
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margin tax. The Trust does not believe that it is subject to the
franchise tax because at least 90% of its income is from passive sources. Please see Tidelands
Annual Report on Form 10-K for the year ended December 31, 2010 for further information. Tidelands
Corporation is a taxable entity and pays U.S. Federal taxes on its income. However, Tidelands
Corporations income specifically excludes 95% of oil and natural gas royalties collected by
Tidelands Corporation, which are retained by and delivered to the Trust in respect of the Trusts
net profits interest.
The Leases
As of August 11, 2011, Tidelands had an overriding royalty interest in five oil and natural
gas leases covering 22,948 gross acres in the Gulf of Mexico in the Galveston, Sabine Pass and West
Cameron areas. Tidelands overriding royalty interest on four of the five leases is 4.1662%. On
the fifth lease, the overriding royalty interest is 1.0416%. The overriding royalty interest on
the fifth lease is lower because Chevron only acquired a 25% working interest in the lease. These
leases and related overriding royalty interests are identified in the table below:
Lease | Gross | Royalty | ||||||||||||||||||
Area | Block | Number | Acres | Interest | Operator(s) | |||||||||||||||
Galveston |
303 | 4565 | 5,760 | 4.1662 | % | W&T Offshore Inc. | ||||||||||||||
Sabine Pass |
13 | 3959 | 3,438 | 4.1662 | % | Black Elk Energy Offshore Operations, LLC | ||||||||||||||
West Cameron |
165 | 758 | 5,000 | 4.1662 | % | Apache Corporation | ||||||||||||||
West Cameron |
291 | 4397 | 5,000 | 4.1662 | % | Apache Corporation | ||||||||||||||
West Cameron |
225 | 900 | 3,750 | 1.0416 | % | Breton Engineering LLC | ||||||||||||||
Total |
22,948 | |||||||||||||||||||
Based on the latest public records reviewed by Tidelands, there are 16 wells that had
production during the past 12 months on leases subject to Tidelands overriding royalty interest
that are listed as active oil or natural gas wells on the records of the Bureau of Ocean Energy,
Management, Regulation and Enforcement, a division of the U.S. government (the BOEMRE). The
wells vary in age from one year to 33 years. Information on each of the 16 wells is presented in
the following table:
Location | Well | Type | First Produced | |||||
West Cameron Block 165
|
A003 | Gas | April 1978 | |||||
West Cameron Block 165
|
A001A | Gas | September 2002 | |||||
West Cameron Block 165
|
A006 | Gas | August 2004 | |||||
West Cameron Block 165
|
A008 | Gas | December 2007 | |||||
West Cameron Block 165
|
A007 | Gas | July 2008 | |||||
West Cameron Block 225
|
D001 | Gas | June 2008 | |||||
Sabine Pass Block 13
|
A001 | Oil | January 1986 | |||||
Sabine Pass Block 13
|
B001A | Oil | May 1997 | |||||
Sabine Pass Block 13
|
A005 | Gas | December 2008 | |||||
Sabine Pass Block 13
|
A006 | Gas | February 2009 | |||||
Sabine Pass Block 13
|
A004 | Oil | May 2009 | |||||
West Cameron Block 291
|
002 | Gas | June 1987 | |||||
West Cameron Block 291
|
003 | Gas | July 2008 | |||||
Galveston Area Block 303
|
B001 | Gas | March 2007 | |||||
Galveston Area Block 303
|
A002 | Gas | March 2010 | |||||
Galveston Area Block 303
|
007 | Gas | March 2010 |
There was a decrease of one active well from June 30, 2010 to June 30, 2011.
Critical Accounting Policies and Estimates
In accordance with the U.S. Securities and Exchange Commission (the SEC) Staff
Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts, Tidelands uses the modified
cash basis method of accounting. Under this accounting method, royalty income is recorded when
received, and distributions to unitholders are recorded when declared by the Trustee of the Trust.
Expenses of Tidelands (which include accounting, legal, and other professional
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fees, trustees fees and out-of-pocket expenses) are recorded on an accrual basis. Tidelands
also reports distributable income instead of net income under the modified cash basis method of
accounting. Cash reserves are permitted to be established by the Trustee for certain contingencies
that would not be recorded under accounting principles generally accepted in the United States of
America (GAAP).
Tidelands did not have any changes in critical accounting policies or in significant
accounting estimates during the three months ended June 30, 2011. Please see Tidelands Annual
Report on Form 10-K for the year ended December 31, 2010 for a detailed discussion of its critical
accounting policies.
General
Tidelands royalty income is derived from the oil and natural gas production activities of
unrelated parties. Tidelands royalty income fluctuates from period to period based upon factors
beyond Tidelands control, including, without limitation, the number of productive wells drilled
and maintained on leases subject to Tidelands interest, the level of production over time from
such wells and the prices at which the oil and natural gas from such wells are sold.
Important aspects of Tidelands operations are conducted by third parties. Tidelands royalty
income is dependent on the operations of the working interest owners of the leases on which
Tidelands has an overriding royalty interest. The oil and natural gas companies that lease tracts
subject to Tidelands interests are responsible for the production and sale of oil and natural gas
and the calculation of royalty payments to Tidelands. The only obligation of the working interest
owners to Tidelands is to make monthly overriding royalty payments of Tidelands interest in the
oil and natural gas sold. Tidelands distributions are processed and paid by American Stock
Transfer & Trust Company, LLC as the agent for Tidelands.
The volume of oil and natural gas produced and its selling price are the primary factors in
the calculation of overriding royalty payments. Production is affected by the declining capability
of the producing wells, the number of new wells drilled, and the number of existing wells re-worked
and placed back in production. Production from existing wells is anticipated to decrease in the
future due to normal well depletion. Tidelands has no input with the operators regarding future
drilling or re-working operations which could impact the oil and natural gas production on the
leases on which Tidelands has an overriding royalty interest.
Summary of Operating Results
During the six months ended June 30, 2011, Tidelands realized approximately 59% of its royalty
income from the sale of oil and approximately 41% of its royalty income from the sale of natural
gas. During the six months ended June 30, 2010, Tidelands realized approximately 23% of its
royalty income from the sale of oil and approximately 77% of its royalty income from the sale of
natural gas. Royalty income includes royalties from oil and natural gas received from producers.
During the six months ended June 30, 2010, Tidelands received a significant percentage of its
royalty income from the West Cameron Block 165 Field. During the six months ended June 30, 2011,
revenues from this field decreased 75% from those realized during the six months ended June 30,
2010. Tidelands believes the decrease in revenue was primarily due to lower prices received for
natural gas, a gradual decline in production from all natural gas wells in this field and the loss
of production from one of the wells in this field.
Distributable income per unit for the six months ended June 30, 2011 decreased to $0.40 from
$0.79 for the comparable period in 2010. Distributions per unit amounted to $0.43 for the six
months ended June 30, 2011, down from $0.89 for the comparable period in 2010. During the six
months ended June 30, 2011, the difference between distributable income per unit and distributions
per unit resulted from timing differences between the closing of the financial statements and the
determination date of the distribution amount to unitholders.
For the six months ended June 30, 2011, oil production increased 761 barrels (bbls) and
natural gas production decreased 94,488 thousand cubic feet (mcf) from the levels realized in the
comparable period in 2010. For the six months ended June 30, 2011, the average price realized for
a barrel of oil increased $16.31 from the price realized in the
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comparable period in 2010, and the average price realized for an mcf of natural gas decreased
$1.29 from the price realized in the comparable period in 2010.
The following table presents the net production quantities of oil and natural gas and
distributable income and distributions per unit for the last six quarters.
Distributable | ||||||||||||||||
Net Production Quantities | Income pre | Distributions per | ||||||||||||||
Quarter | Oil (bbls) | Natural Gas (mcf) | Unit | Unit | ||||||||||||
March 31, 2010 |
1,876 | 89,574 | $ | 0.46 | $ | 0.45 | ||||||||||
June 30, 2010 |
1,715 | 63,393 | $ | 0.33 | $ | 0.44 | ||||||||||
September 30, 2010 |
2,040 | 48,654 | $ | 0.25 | $ | 0.27 | ||||||||||
December 31, 2010 |
3,019 | 67,102 | $ | 0.39 | $ | 0.37 | ||||||||||
March 31, 2011 |
2,966 | 33,414 | $ | 0.25 | $ | 0.23 | ||||||||||
June 30, 2011 |
1,386 | 25,085 | $ | 0.14 | $ | 0.20 |
Results of Operations Three Months Ended June 30, 2011 and 2010
Income from oil and natural gas royalties decreased $253,950 to $272,041 during the three
months ended June 30, 2011 from $525,991 realized in the comparable quarter of 2010. The decrease
was primarily due to a decrease in natural gas production from the West Cameron Block 165 Field.
Distributable income decreased to $198,003 for the three months ended June 30, 2011 from
$456,320 realized in the comparable period in 2010.
Income from oil royalties increased to $145,900 for the three months ended June 30, 2011 from
$135,845 realized in the comparable period in 2010. The volume of oil sold decreased by 329 bbls,
while the average price realized for a barrel of oil increased $26.06 to $105.27 for the three
months ended June 30, 2011 from $79.21 realized in the comparable period in 2010.
Income from natural gas royalties decreased to $126,141 for the three months ended June 30,
2011 from $390,146 realized in the corresponding period in 2010. The volume of natural gas sold
decreased by 38,308 mcf and the average price of natural gas decreased $1.12 per mcf to $5.03 from
$6.15 realized in the comparable period in 2010.
The following table presents the quantities of oil and natural gas sold and the average price
realized from current operations for the three months ended June 30, 2011 and those realized in the
comparable three months in 2010.
Three Months Ended June 30, | ||||||||||||
2011 | 2010 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Barrels sold |
1,386 | 1,715 | (19 | )% | ||||||||
Average price |
$ | 105.27 | $ | 79.21 | 33 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
25,085 | 63,393 | (60 | )% | ||||||||
Average price |
$ | 5.03 | $ | 6.15 | (18 | )% |
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General and administrative expenses increased to $74,038 in the three months ended June 30,
2011 from $68,471 in the comparable period in the prior year primarily due to increased
professional fees and expenses.
Results of Operations Six Months Ended June 30, 2011 and 2010
Income from oil and natural gas royalties decreased $520,234 to $688,354 during the six months
ended June 30, 2011 from $1,208,588 realized in the comparable quarter of 2010. The decrease was
primarily due to a decrease in natural gas production from the West Cameron Block 165 Field.
Distributable income decreased to $548,651 for the six months ended June 30, 2011 from
$1,092,815 realized in the comparable period in 2010.
Income from oil royalties increased to $408,396 for the six months ended June 30, 2011 from
$278,423 realized in the comparable period in 2010. The volume of oil sold increased by 761 bbls,
while the average price realized for a barrel of oil increased $16.31 to $93.84 for the six months
ended June 30, 2011 from $77.53 realized in the comparable period in 2010.
Income from natural gas royalties decreased to $279,958 for the six months ended June 30, 2011
from $930,165 realized in the corresponding period in 2010. The volume of natural gas sold
decreased by 94,488 mcf and the average price of natural gas decreased $1.29 per mcf to $4.79 from
$6.08 realized in the comparable period in 2010.
The following table presents the quantities of oil and natural gas sold and the average price
realized from current operations for the six months ended June 30, 2011 and those realized in the
comparable six months in 2010.
Six Months Ended June 30, | ||||||||||||
2011 | 2010 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Barrels sold |
4,352 | 3,591 | 21 | % | ||||||||
Average price |
$ | 93.84 | $ | 77.53 | 21 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
58,479 | 152,967 | (62 | )% | ||||||||
Average price |
$ | 4.79 | $ | 6.08 | (21 | )% |
General and administrative expenses increased to $139,703 in the six months ended June 30,
2011 from $112,573 in the comparable period in the prior year primarily due to increased
professional fees and expenses.
Forward-Looking Statements
The statements discussed in this Quarterly Report on Form 10-Q regarding Tidelands
future financial performance and results, and other statements that are not historical facts, are
forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended.
This report uses the words may, expect, anticipate, estimate, believe, continue,
intend, plan, budget, or other similar words to identify forward-looking statements. You
should read statements that contain these words carefully because they discuss future expectations,
contain projections of Tidelands financial condition, and/or state other forward-looking
information. Actual results may differ from expected results because of: reductions in prices or
demand for oil and natural gas, which might then lead to decreased production; reductions in
production due to the depletion of existing wells or disruptions in service, which may be caused by
storm damage to production facilities, blowouts or other production accidents, or geological
changes such as cratering of
productive formations; changes in regulations; and the expiration or release of leases subject
to Tidelands interests. Additional risks are set forth in Tidelands Annual Report on Form 10-K
for the year ended December 31, 2010. Events may occur in the future that Tidelands is unable to
accurately predict, or over which it has
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no control. If one or more of these uncertainties materialize, or if underlying
assumptions prove incorrect, actual outcomes may vary materially from those forward-looking
statements included in this Quarterly Report on Form 10-Q.
Website
Tidelands has an Internet website and has made available Tidelands Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports,
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), at www.tirtz-tidelandsroyaltytrust.com. Each of these reports
will be posted on this website as soon as reasonably practicable after such report is
electronically filed with or furnished to the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Tidelands did not experience any material changes in market risk during the period covered by
this Quarterly Report on Form 10-Q. Tidelands market risk is described in more detail in Item
7A. Quantitative and Qualitative Disclosures About Market Risk in Tidelands Annual Report on Form
10-K for the year ended December 31, 2010.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
U.S. Trust, Bank of America Private Wealth Management, as Trustee of the Trust, is responsible
for establishing and maintaining Tidelands disclosure controls and procedures. Tidelands
disclosure controls and procedures include controls and other procedures that are designed to
ensure that information required to be disclosed by Tidelands in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by
Tidelands in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Trustee as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Trustee carried
out an evaluation of the effectiveness of the design and operation of Tidelands disclosure
controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that
evaluation, the Trustee concluded that Tidelands disclosure controls and procedures were effective
as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There has not been any change in Tidelands internal control over financial reporting during
the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is
reasonably likely to materially affect, Tidelands internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed under the
heading Item 1A. Risk Factors in Tidelands Annual Report filed on Form 10-K for the year ended
December 31, 2010.
Item 6. Exhibits
The following exhibits are included herein:
31.1 | Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of the Corporate Trustee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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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.
TIDELANDS ROYALTY TRUST B
U.S. Trust, Bank of America Private Wealth Management, Trustee |
||||
August 11, 2011 | By: | /s/ Ron E. Hooper | ||
Ron E. Hooper | ||||
Senior Vice President | ||||
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