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EX-31.1 - EX-31.1 - TIDELANDS ROYALTY TRUST B | d85632exv31w1.htm |
EX-32.1 - EX-32.1 - TIDELANDS ROYALTY TRUST B | d85632exv32w1.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 September 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 þ 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 (Do not check if a smaller reporting company) |
Smaller reporting company þ |
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 November 9, 2011, Tidelands Royalty Trust B had 1,386,375 units of beneficial
interest outstanding.
TIDELANDS ROYALTY TRUST B
INDEX
Page | ||||||||
Number | ||||||||
PART I. FINANCIAL INFORMATION |
||||||||
1 | ||||||||
1 | ||||||||
2 | ||||||||
3 | ||||||||
4 | ||||||||
6 | ||||||||
11 | ||||||||
11 | ||||||||
PART II. OTHER INFORMATION |
||||||||
12 | ||||||||
12 | ||||||||
EX-31.1 | ||||||||
EX-32.1 |
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST
CORPUS
As of September 30, 2011 and December 31, 2010
CORPUS
As of September 30, 2011 and December 31, 2010
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,074,438 | $ | 1,299,734 | ||||
Oil, gas and other mineral properties |
2 | 2 | ||||||
Federal income tax refundable |
12,734 | 12,734 | ||||||
Total assets |
$ | 1,087,174 | $ | 1,312,470 | ||||
LIABILITIES AND TRUST CORPUS |
||||||||
Current liabilities: |
||||||||
Income distributable to unitholders |
$ | 375,735 | $ | 507,437 | ||||
Total current liabilities |
$ | 375,735 | $ | 507,437 | ||||
Trust corpus authorized 1,386,525
units of beneficial
interest, issued 1,386,375 at nominal
value |
$ | 711,439 | $ | 805,033 | ||||
$ | 1,087,174 | $ | 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 Nine Months Ended September 30, 2011 and 2010
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Income: |
||||||||||||||||
Oil and gas
royalties |
$ | 360,559 | $ | 413,669 | $ | 1,048,913 | $ | 1,622,257 | ||||||||
Interest income |
| | | | ||||||||||||
Total income |
$ | 360,559 | $ | 413,669 | $ | 1,048,913 | $ | 1,622,257 | ||||||||
Expenses: |
||||||||||||||||
General and
administrative |
$ | 37,275 | $ | 65,017 | $ | 176,978 | $ | 177,590 | ||||||||
Distributable income
before Federal
income taxes |
323,284 | 348,652 | 871,935 | 1,444,667 | ||||||||||||
Federal income taxes
of subsidiary |
| | | 3,200 | ||||||||||||
Distributable income. |
$ | 323,284 | $ | 348,652 | $ | 871,935 | $ | 1,441,467 | ||||||||
Distributable income
per unit |
$ | 0.23 | $ | 0.25 | $ | 0.63 | $ | 1.04 | ||||||||
Distributions per
unit |
$ | 0.27 | $ | 0.27 | $ | 0.70 | $ | 1.16 | ||||||||
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
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS
For the Nine Months Ended September 30, 2011 and 2010
(Unaudited)
(Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Trust corpus, beginning of period |
$ | 805,033 | $ | 937,904 | ||||
Distributable income |
871,935 | 1,441,467 | ||||||
Distributions to unitholders |
(965,529 | ) | (1,611,099 | ) | ||||
Trust corpus, end of period |
$ | 711,439 | $ | 768,272 | ||||
See accompanying notes to condensed consolidated financial statements.
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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 owned by Tidelands Corporation, 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 $0.27129 per unit, which it paid on October 14, 2011 to unitholders of record
on September 30, 2011.
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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 that is 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 that are 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 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 November 9, 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:
Gross | Royalty | |||||||||||||||||
Area | Block | Lease 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 that are 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 | April 2011 | |||||
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 net decrease of one active well from September 30, 2010 to September 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 (including accounting, legal, and other
professional fees,
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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 and nine months ended September 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 that are 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
from the operators regarding future drilling or re-working operations that 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 nine months ended September 30, 2011, Tidelands realized approximately 62% of its
royalty income from the sale of oil and approximately 38% of its royalty income from the
sale of natural gas. During the nine months ended September 30, 2010, Tidelands realized
approximately 73% of its royalty income from the sale of natural gas and approximately 27%
of its royalty income from the sale of oil. Royalty income includes royalties from oil and
natural gas received from producers.
During the nine months ended September 30, 2010, Tidelands received a significant percentage of
its royalty income from the West Cameron Block 165 Field. During the nine months ended
September 30, 2011, revenues from this field decreased 70% from those realized during the
nine months ended September 30, 2010. Tidelands believes the decrease in revenue was
primarily due to the decline in production from all natural gas wells in this field and the
net loss of production of one well in this field.
Distributable income per unit for the nine months ended September 30, 2011 decreased to $0.63
from $1.04 for the comparable period in 2010. Distributions per unit amounted to $0.70 for
the nine months ended September 30, 2011, down from $1.16 for the comparable period in
2010. During the nine months ended September 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 nine months ended September 30, 2011, oil production increased 772 barrels (bbls)
and natural gas production decreased 119,526 thousand cubic feet (mcf) from the levels
realized in the comparable period in 2010. For the nine months ended September 30, 2011,
the average price realized for a barrel of oil increased $22.99 from the price
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realized in
the comparable period in 2010, and the average price realized for an mcf of natural gas
decreased $0.96 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 per | Distributions | ||||||||||||||
Quarter | Oil (bbls) | Natural Gas (mcf) | Unit | per Unit | ||||||||||||
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 | ||||||||||
September 30,
2011 |
2,051 | 23,616 | $ | 0.23 | $ | 0.27 |
Results of Operations Three Months Ended September 30, 2011 Compared to the Three Months
Ended September 30, 2010
Income from oil and natural gas royalties decreased $53,110 to $360,559 during the three months
ended September 30, 2011 from $413,669 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 $323,284 for the three months ended September 30, 2011 from
$348,652 realized in the comparable period in 2010.
Income from oil royalties increased to $237,518 for the three months ended September 30, 2011
from $160,152 realized in the comparable period in 2010. The volume of oil sold in the
three months ended September 30, 2011 increased by 11 bbls, while the average price
realized for a barrel of oil increased $37.30 to $115.81 for the three months ended
September 30, 2011 from $78.51 realized in the comparable period in 2010.
Income from natural gas royalties decreased to $123,041 for the three months ended September 30,
2011 from $253,517 realized in the corresponding period in 2010. The volume of natural gas
sold in the three months ended September 30, 2011 decreased by 25,038 mcf and the average
price of natural gas remained unchanged from the comparable period in 2010.
The following table presents the quantities of oil and natural gas sold and the average
price realized for the three months ended September 30, 2011 and those realized in the
comparable three months in 2010.
Three Months Ended September 30, | ||||||||||||
2011 | 2010 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Bbls sold |
2,051 | 2,040 | 1 | % | ||||||||
Average price |
$ | 115.81 | $ | 78.51 | 48 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
23,616 | 48,654 | (51 | %) | ||||||||
Average price |
$ | 5.21 | $ | 5.21 | |
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General and administrative expenses decreased to $37,275 in the three months ended September 30,
2011 from $65,017 in the comparable period in the prior year primarily due to decreased
professional fees and expenses.
Results of Operations Nine Months Ended September 30, 2011 Compared to the Nine Months Ended
September 30, 2010
Income from oil and natural gas royalties decreased $573,344 to $1,048,913 during the nine
months ended September 30, 2011 from $1,622,257 realized in the comparable period 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 $871,935 for the nine months ended September 30, 2011 from
$1,441,467 realized in the comparable period in 2010.
Income from oil royalties increased to $645,914 for the nine months ended September 30, 2011
from $438,575 realized in the comparable period in 2010. The volume of oil sold increased
by 772 bbls, while the average price realized for a barrel of oil increased $22.99 to
$100.88 for the nine months ended September 30, 2011 from $77.89 realized in the comparable
period in 2010.
Income from natural gas royalties decreased to $402,999 for the nine months ended September 30,
2011 from $1,183,682 realized in the corresponding period in 2010. The volume of natural
gas sold decreased by 119,526 mcf and the average price of natural gas decreased $0.96 per
mcf to $4.91 from $5.87 realized in the comparable period in 2010.
The following table presents the quantities of oil and natural gas sold and the average
price realized for the nine months ended September 30, 2011 and those realized in the
comparable nine months in 2010.
Nine Months Ended September 30, | ||||||||||||
2011 | 2010 | |||||||||||
(Unaudited) | (Unaudited) | % Change | ||||||||||
Oil |
||||||||||||
Bbls sold |
6,403 | 5,631 | 14 | % | ||||||||
Average price |
$ | 100.88 | $ | 77.89 | 30 | % | ||||||
Natural gas |
||||||||||||
Mcf sold |
82,095 | 201,621 | (59 | %) | ||||||||
Average price |
$ | 4.91 | $ | 5.87 | (16 | %) |
General and administrative expenses decreased to $176,978 in the nine months ended September 30,
2011 from $177,590 in the comparable period in the prior year primarily due to decreased
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 anticipate, believe, budget, continue,
estimate, expect, intend, may, plan, 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 |
||||
November 10, 2011 | By: | /s/ Ron E. Hooper | ||
Ron E. Hooper | ||||
Senior Vice President | ||||
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