DOMINION RESOURCES BLACK WARRIOR TRUST - FORM 10-Q

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EX-32.1 - EX-32.1 - DOMINION RESOURCES BLACK WARRIOR TRUST	d30636dex321.htm
EX-31.1 - EX-31.1 - DOMINION RESOURCES BLACK WARRIOR TRUST	d30636dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨	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.)

Royalty Trust Management

Southwest Bank

2911 Turtle Creek Blvd., Suite 850

Dallas, Texas 75219

(Address of principal executive offices)

(Zip Code)

(855) 588-7839

(Registrant’s telephone number, including area code)

None

(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 x No ¨

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 ¨ No ¨

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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of units of beneficial interest outstanding at November 19, 2015: 7,850,000

DOMINION RESOURCES BLACK WARRIOR TRUST

INDEX


		Page Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		1

	Condensed Statements of Assets, Liabilities and Trust Corpus as of September 30, 2015 (Unaudited) and December 31, 2014		3

	Condensed Statements of Distributable (Loss) Income for the Three Months Ended September 30, 2015 and 2014 (Unaudited)		4

	Condensed Statements of Distributable Income for the Nine Months Ended September 30, 2015 and 2014 (Unaudited)		5

	Condensed Statements of Changes in Trust Corpus for the Nine Months Ended September 30, 2015 and 2014 (Unaudited)		6

	Notes to Condensed Financial Statements (Unaudited)		7

Item 2.	Trustee’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18

Item 4.	Controls and Procedures		18

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		19

Item 1A.	Risk Factors		19

Item 6.	Exhibits		20

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The condensed financial statements included herein have been prepared by Southwest Bank, as Trustee of Dominion Resources Black Warrior Trust (the “Trust”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Effective August 29, 2014, Southwest Bank became the new Trustee for the Trust. The defined term “Trustee” as used herein shall refer to Bank of America, N.A. for periods prior to August 29, 2014, and shall refer to Southwest Bank for periods on or after August 29, 2014. 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, 2014, and, therefore, are subject to year-end adjustments. It is suggested that these condensed financial statements and notes thereto 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, 2014. The December 31, 2014 condensed statement of assets, liabilities, and trust corpus is derived from the audited statement of assets, liabilities, and trust corpus 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 September 30, 2015, the distributable (loss) income for the three-month and the nine-month periods ended September 30, 2015 and 2014 and the changes in trust corpus for the nine-month periods ended September 30, 2015 and 2014, have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

The condensed financial statements as of September 30, 2015, and for the three-month and nine-month periods ended September 30, 2015 and 2014 included herein have been reviewed by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Unit Holders of Dominion Resources Black Warrior Trust and

Southwest Bank, N.A., Trustee

Dallas, Texas

We have reviewed the accompanying condensed statement of assets, liabilities and trust corpus of Dominion Resources Black Warrior Trust (the “Trust”) as of September 30, 2015, and the related condensed statements of distributable income (loss) for the three-month and nine-month periods ended September 30, 2015 and 2014 and changes in trust corpus for the nine-month periods ended September 30, 2015 and 2014. These interim financial statements are the responsibility of the Trustee.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 interim financial statements, these condensed interim 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 reviews, we are not aware of any material modifications that should be made to such condensed interim financial statements for them to be in conformity with the basis of accounting described in Note 2.

The accompanying condensed financial statements have been prepared assuming that the Trust will continue as a going concern. Financial statements prepared on the going concern basis assume the realization of assets and the settlement of liabilities in the normal course of business. As discussed in Note 2 to the financial statements, certain conditions raise substantial doubt about the Trust’s ability to continue as a going concern. The Trustee’s plans concerning this matter are also discussed in Note 6 to the financial statements.

As described in Note 6 to the condensed interim financial statements, in March 2012, Walter Black Warrior Basin LLC notified the Trustee, that it is undertaking a study of the underlying properties on a well-by-well basis to determine the economic viability of continuing to produce each individual well. If Walter Black Warrior Basin LLC decides to suspend production or abandon any such wells, such decision could adversely affect the Trust’s future revenue stream, and if a significant number of wells are abandoned, it could cause a termination of the Trust.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statements of assets, liabilities, and trust corpus of Dominion Resources Black Warrior Trust as of December 31, 2014, 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 23, 2015, we expressed an unqualified opinion on those financial statements and included an explanatory paragraph concerning the study of the underlying properties on a well-by-well basis to determine the economic viability of continuing to produce each individual well. In our opinion, the information set forth in the accompanying condensed statement of assets, liabilities and trust corpus as of December 31, 2014 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, TX

November 23, 2015

DOMINION RESOURCES BLACK WARRIOR TRUST

CONDENSED STATEMENTS OF ASSETS,

LIABILITIES AND TRUST CORPUS (UNAUDITED)


ASSETS
	Note		September 30, 2015		December 31, 2014
			(Unaudited)
Current assets:
Cash and cash equivalents			$	9,293	$	176,847
Royalty interests in gas properties (less accumulated amortization and impairment of $151,899,099 and $148,067,406, respectively				3,918,401		7,750,094

Total assets			$	3,927,694	$	7,926,941

LIABILITIES AND TRUST CORPUS
Current liabilities:
Trust administration expenses payable			$	699,152	$	160,570

Contingencies		6		—		—
Trust corpus – 7,850,000 units of beneficial interest authorized, issued and outstanding				3,228,542		7,766,371

			$	3,927,794	$	7,926,941

The accompanying notes are an integral part of these condensed financial statements.

DOMINION RESOURCES BLACK WARRIOR TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE (LOSS) INCOME (UNAUDITED)


			Three Months Ended September 30,
	Note		2015			2014
Income:
Royalty income			$	—		$	1,848,299
Interest income				4			26

Total income				4			1,848,325
Expenses:
General and administrative				(640,054	)		(273,993	)

Distributable (loss) income		1, 5	$	(640,050	)	$	1,574,332

Distributable (loss) income per unit (7,850,000 units)			$	(0.08	)	$	0.20

The accompanying notes are an integral part of these condensed financial statements.

DOMINION RESOURCES BLACK WARRIOR TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)


			Nine Months Ended September 30,
	Note		2015			2014
Income:
Royalty income			$	2,747,134		$	5,395,991
Interest income				31			176

Total income				2,747,165			5,396,167
Expenses:
General and administrative				(1,307,904	)		(956,037	)

Distributable income		1, 5	$	1,439,261		$	4,440,130

Distributable income per unit (7,850,000 units)			$	0.18		$	0.57

The accompanying notes are an integral part of these condensed financial statements.

DOMINION RESOURCES BLACK WARRIOR TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)


			Nine Months Ended September 30,
	Note		2015			2014
Trust corpus, beginning of period			$	7,766,371		$	8,920,146
Amortization of royalty interests				(567,252	)		(1,459,902	)
Impairment of royalty interests		2		(3,264,441	)		—
Distributable income				1,439,261			4,440,130
Distributions to unitholders		5		(2,145,397	)		(4,379,649	)

Trust corpus, end of period			$	3,228,542		$	7,520,725

Distributions per unit (7,850,000 units)		5	$	0.27		$	0.56

The accompanying notes are an integral part of these condensed financial statements.

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, among Dominion Black Warrior Basin, Inc., an Alabama corporation, as trustor; Dominion Resources, Inc., a Virginia corporation (“Dominion Resources”); and NationsBank of Texas, N.A., a national banking association, as the initial trustee; and BNY Mellon Trust of Delaware, a national banking association (the “Delaware Trustee”), as trustees. Southwest Bank, a state bank chartered under the laws of the State of Texas (“Southwest Bank”) now serves as the trustee (the “Trustee”). The trustees are independent financial institutions.

On January 9, 2014, Bank of America, N.A. (as successor to NationsBank of Texas, N.A.) gave notice to holders of units of beneficial interest in the Trust (“Unitholders”) and the Delaware Trustee that it would be resigning as trustee subject to certain conditions that included the appointment of Southwest Bank or another successor trustee as trustee of the Trust by a vote of the Unitholders or a court order. Effective as of August 29, 2014, a court appointed Southwest Bank as successor trustee of the Trust and Bank of America’s resignation as trustee became effective.

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 Walter Black Warrior Basin LLC, a Delaware limited liability company, as successor to Dominion Black Warrior Basin, Inc. (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”), 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 all the Units to its parent, Dominion Energy, Inc., a Virginia corporation, which in turn transferred all the Units to its parent, Dominion Resources, Inc., a Virginia corporation (“Dominion Resources”), which sold an aggregate of 6,904,000 Units to the public through various underwriters (the “Underwriters”) in June and August 1994 and the remaining 946,000 Units through certain of the Underwriters in June 1995. 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 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 amount realized by the Trust upon termination will be allocated to Unitholders in the same manner as the Trustee allocates the income received by the Trust.

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. However, recent rulings by the Bankruptcy Court related to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q and efforts by the Company to dissolve the Trust’s ownership of its interest in the Underlying Properties have resulted in the Trust recording a $3.3 million impairment at September 30, 2015 and could result in additional substantial impairments if no timely relief is provided by the Bankruptcy Court currently considering these issues or an appellate court.

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, as amended.

On July 31, 2007, subsidiaries of HighMount Exploration & Production LLC (“HighMount”) purchased certain assets from subsidiaries of Dominion Resources, including all of the equity interests in the Company which owns the interests in the Underlying Properties that are burdened by the Trust’s Royalty Interests. The Trust continued to have ownership in the Royalty Interests burdening the Underlying Properties and such sale did not affect that ownership. In connection with the sale, Dominion Resources assigned its rights and obligations under the Trust Agreement governing the Trust and the Administrative Services Agreement, dated as of June 28, 1994, between Dominion Resources and the Trust, to HighMount Exploration & Production Alabama LLC (“HighMount Alabama”), a Delaware limited liability company, which was a subsidiary of HighMount.

On May 28, 2010, Walter Natural Gas, LLC, a wholly owned subsidiary of Walter Energy, LLC, acquired the Alabama natural gas interests of HighMount, effective March 1, 2010. The acquisition included the Company’s Alabama coal bed methane operations, including the 532 existing conventional gas wells in which the Trust has a net profits interest. The transaction was structured as an acquisition of the membership interests in HighMount Alabama, following which, HighMount Alabama’s name was changed to “Walter Exploration & Production LLC.” Walter Exploration & Production will continue to be party to the Administrative Services Agreement and Trust Agreement. Walter Exploration & Production will continue to own all the interests in the Company, and the Company, which has changed its name to “Walter Black Warrior Basin LLC,” will continue to own the Underlying Properties. The Trust continues to have ownership in the Royalty Interests burdening the Underlying Properties and such sale did not affect that ownership. However, recent rulings by the Bankruptcy Court related to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q and efforts by the Company to dissolve the Trust’s ownership of its interest in the Underlying Properties could affect the Trust’s ownership if no timely relief is provided by the Bankruptcy Court currently considering these issues or an appellate court. (See Note 6 to the condensed financial statements of the Trust in this Form 10-Q for additional information regarding the bankruptcy matter filed on behalf of Walter Energy, Inc., the parent of the Company, together with certain of its subsidiaries and affiliates, including the Company.)

2.	BASIS OF ACCOUNTING AND GOING CONCERN

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 5).

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 income is not accrued in the period of production, general and administrative expenses recorded are based on liabilities paid and certain cash reserves that may be established rather than on an accrual basis, and amortization of the Royalty Interests is not charged against operating results. This comprehensive basis of accounting other than accounting principles generally accepted in the United States of America corresponds to the accounting 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.

Impairment

The Trustee routinely reviews the Trust’s Royalty Interests in gas properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trust’s Royalty Interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the Royalty Interests exceeds the fair value of these assets, which would likely be measured by discounting projected cash flows. Given the uncertainty of the impact from the ongoing Walter Energy, Inc. bankruptcy and the uncertain status of the court rulings as of this filing date (see Note 6 to the condensed financial statements of the Trust in this Form 10-Q), the Trust has recorded an impairment of $3.3 million during the three-month period ended September 30, 2015. The impairment resulted in a non-cash charge to trust corpus and did not affect the Trust’s distributable income. There were no impairments in the carrying value of the Royalty Interests during 2014.

Use of Estimates

The preparation of financial statements in conformity with the basis of accounting described above requires the Trustee to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting period. Actual results may differ from such estimates.

Distributable Income Per Unit

Basic distributable income per unit is computed by dividing distributable income by the weighted average units outstanding. Distributable income per unit assuming dilution is computed by dividing distributable income by the weighted average number of units and equivalent units outstanding. The Trust had no equivalent units outstanding for any period presented, thus basic distributable income per unit and diluted distributable income per unit are the same.

Contingencies

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unitholders. The Trustee is not aware of any such items as of September 30, 2015, other than as stated in Note 6 to the condensed financial statements of the Trust in this Form 10-Q.

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the Trust’s financial statements.

Going Concern

The accompanying condensed financial statements have been prepared assuming that the Trust will continue as a going concern. Financial statements prepared on the going concern basis assume the realization of assets and the settlement of liabilities in the normal course of business. As discussed in Note 6 to the condensed financial statements of the Trust in this Form 10-Q, certain conditions raise substantial doubt about the Trust’s ability to continue as a going concern. The Trustee’s plans concerning this matter are also discussed in Note 6 to the condensed financial statements of the Trust in this Form 10-Q. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3.	FEDERAL INCOME TAXES

For federal income tax purposes, the Trust constitutes a fixed investment trust that is taxed as a grantor trust. A grantor trust is not subject to tax at the trust level. The Unitholders are considered, for federal tax purposes, to own the Trust’s income and principal as though no trust were in existence. The income of the Trust is deemed to have been received or accrued by each Unitholder at the time such income is received or accrued by the Trust and not when distributed by the Trust. To the extent that distributions to the Trust, if any, are delayed until after 2015 due to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q, a corresponding delay will result for a Unitholder in when such distribution must be included in its federal taxable income.

The Royalty Interests constitute “economic interests” in oil and gas properties for federal income tax purposes. Unitholders must report their share of the revenues from the Royalty Interests as ordinary income from oil and gas royalties and are entitled to claim depletion with respect to such income. During the third quarter of 2015, the Trust also incurred administration expenses and earned interest income on funds held for distribution and for the cash reserve maintained for the payment of contingent and future obligations of the Trust.

The classification of the Trust’s income for purposes of the passive loss rules may be important to a Unitholder. Royalty income generally is treated as portfolio income and does not offset passive losses.

Some Trust Units 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, collectively referred to herein as “middlemen”). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. Southwest Bank, EIN: 75-1105980, 2911 Turtle Creek Boulevard, Suite 850, Dallas, Texas 75219, telephone number (855) 588-7839, email address trustee@dom-dominion.com is the representative of the Trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT. Tax information is also posted by the Trustee at www.dom-dominion.com. Notwithstanding the foregoing, the middlemen holding Trust Units on behalf of Unitholders, and not the Trustee of the Trust, are solely responsible for complying with the information reporting requirements under the U.S. Treasury Regulations with respect to such Trust Units, including the issuance of IRS Forms 1099 and certain written tax statements. Unitholders whose Trust Units are held by middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the Trust Units.

Pursuant to the Foreign Account Tax Compliance Act (commonly referred to as “FATCA”), distributions from the Trust to “foreign financial institutions” and certain other “non-financial foreign entities” may be subject to U.S. withholding taxes. Specifically, certain “withholdable payments” (including certain royalties, interest and other gains or income from U.S. sources) made to a foreign financial institution or non-financial foreign entity will generally be subject to the withholding tax unless the foreign financial institution or non-financial foreign entity complies with certain information reporting, withholding, identification, certification and related requirements imposed by FATCA. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

The Treasury Department has issued guidance providing that the FATCA withholding rules described above generally apply to qualifying payments made after June 30, 2014. Foreign Unitholders are encouraged to consult their own tax advisors regarding the possible implications of these withholding provisions on their investment in Trust Units.

Unitholders should consult their tax advisors regarding Trust tax compliance matters.

4.	STATE TAX CONSIDERATIONS

The Trust holds properties located in Alabama. Unitholders should consult the Trust’s latest annual report on Form 10-K for a summary of Alabama state tax matters.

5.	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 that 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 if a distribution is made. 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. However, as a result of rulings by the Bankruptcy Court related to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q, a distribution was not made during the third quarter of 2015 and the Trust does not anticipate being able to make further distributions in 2015.

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.

6.	CONTINGENCIES

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unitholders. The Trustee is aware of no such items as of September 30, 2015, other than as stated below.

On July 28, 2015, the Trust announced that it received a letter from Walter Energy, Inc., the parent of the Company, stating that it, together with certain of its subsidiaries and affiliates, including the Company (“Debtors”) filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Northern District of Alabama Southern Division on July 15, 2015 and that it had an agreement with lenders regarding a pre-negotiated restructuring plan. In the letter, Walter Energy, Inc. advised the Trust that it is not permitted to pay obligations that arose prior to July 15, 2015, including payments on the Royalty Interests. Specifically, the Trustee was informed by Walter Energy, Inc. that it would not be paying the distribution to the Trust that would normally be paid by August 14, 2015 and normally would include payments on the Royalty Interests for the production months of April, May and June 2015, as well as the portion of any future quarterly distributions relating to production attributable to periods prior to July 15, 2015.

On the date the bankruptcy was filed – in a series of “first day motions” – the Debtors filed motions relating to use of their cash collateral and cash management, which provide that Debtors’ cash and certain other property constitute collateral of the Debtors’ lenders subject to protective liens and permit use of a “zero balance” cash management system where receipts from operations, including Debtors’ gas operations, could be swept into certain concentration or disbursement accounts. The motions did not separately segregate or provide separate treatment for production proceeds relating to the Trust’s Royalty Interests. The Trust engaged counsel, filed motions asking the court to reconsider and amend the Debtors’ cash management order and objected to the cash collateral motion by seeking segregation of production proceeds relating to the Trust’s Royalty Interests and judicial confirmation that such proceeds are not property of the Debtor’s bankruptcy estate. On August 18, 2015, the Bankruptcy Court denied the Trust’s motion to reconsider the Debtors’ cash management order. A hearing on the Trust’s objection to the Debtors’ cash collateral motion, among others, was held on September 2 and 3, 2015. On September 14, 2015, the court issued its ruling on the Debtors’ cash collateral motion and denied the Trust’s request for protections based on the Debtors’ use of the production proceeds, which included denying (i) segregation of the production proceeds and (ii) a requirement for continued distributions of production proceeds to the Trust in the ordinary course of business. After a subsequent hearing to consider additional cash collateral issues, on October 12, 2015, the Trust filed a notice of appeal of the Bankruptcy Court’s cash collateral ruling, and the appeal is currently pending.

On October 2, 2015, the Company filed a motion in the Bankruptcy Court to reject the Conveyance (and certain related contracts) effective retroactively to July 15, 2015. The contracts that the Company seeks to reject create the Trust’s right to receive payments on the Royalty Interests from the Company. If granted and not reversed on subsequent appeal, the relief sought in this motion would excuse the Company from performance under the Conveyance at all times after July 15, 2015, including payments on the Royalty Interests. The Company’s motion to reject the Conveyance was heard on November 10, 2015. At that time, the Court requested written findings of fact and conclusions from the Company and the Trustee and took the matter under advisement. The Court has not yet ruled on the motion.

If Walter Energy, Inc. does not pay a distribution to the Trust by December 31, 2015 representing payments on the Royalty Interests for the production months of July, August and September 2015, pursuant to Section 9.02(b) of the Trust Agreement, it is expected that the Trust will terminate as a result of the failure to maintain a 1.2 to 1.0 ratio for two consecutive calendar quarters of (i) cash received pursuant to the Royalty Interests to (ii) administrative costs. See “Item 2 –Trustee’s Discussion and Analysis of Financial Condition and Results of Operations –Termination and Liquidation of the Trust” and “Part II – Other Information – Item 1A – Risk Factors.” To date, Walter Energy, Inc. has not paid a distribution to the Trust representing payments on the Royalty Interests for the production months of July, August and September.

In March 2012, the Company notified the Trustee that it is undertaking a study of the Underlying Properties on a well-by-well basis to determine the economic viability of continuing to produce each individual well. The Company informed the Trustee that it abandoned 11 wells in 2012, 11 wells in 2013 and 8 wells in 2014 as the Company considered them uneconomic and will continue to evaluate an additional 10 to 20 wells in 2015. It is currently unclear what impact the bankruptcy proceeding will have on this process. If the Company decides to suspend production or abandon any such additional wells, such decision could adversely affect the Trust’s future revenue stream, and if a significant number of wells are abandoned, it could cause a termination of the Trust.

The Trust is named as a defendant in an action, styled Southwest Royalties, Inc. v. Dominion Black Warrior Basin, Inc., et al., filed in the Circuit Court of Fayette County Alabama on October 5, 2007 regarding the quieting of title in certain oil and gas rights related to property in Fayette and Tuscaloosa Counties in Alabama. The plaintiff alleges that defendants are knowingly producing gas in violation of the deeds in question. The plaintiff is also alleging conversion of gas, continuing trespass by defendants on the plaintiff’s property, and suppression of material facts by defendants, and the plaintiff is requesting an accounting, injunctive relief and compensatory and punitive damages, plus court costs and attorneys’ fees. The Trustee does not believe this litigation will have a material effect on the Trust’s financial statements.

Item 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity and Capital Resources

The Trust makes quarterly cash distributions to 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 the Royalty Interests burdening the Underlying Properties. The Royalty Interests owned by the Trust burden the interest in the Underlying Properties that is owned by the Company, an indirect wholly-owned subsidiary of Walter Energy, LLC.

Distributable income of the Trust consists of the excess of royalty income plus interest income over the administrative expenses of the Trust. Upon receipt by the Trust, royalty income is invested in short-term investments in accordance with 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 5 to the condensed 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.)

See Note 6 to the condensed financial statements of the Trust appearing elsewhere in this Form 10-Q for additional information regarding the bankruptcy proceedings of Walter Energy, Inc., the parent of the Company, together with certain of its subsidiaries and affiliates, including the Company (“Debtors”). See “Item 1 — Business — Description of the Trust — Termination and Liquidation of the Trust” and “Item 1A — Risk Factors” in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 23, 2015, which is accessible on the SEC’s website at www.sec.gov, and “Part II — Other Information — Item 1A. Risk Factors” below for additional information.

Going Concern

The accompanying condensed financial statements have been prepared assuming that the Trust will continue as a going concern. Financial statements prepared on the going concern basis assume the realization of assets and the settlement of liabilities in the normal course of business. As discussed in Note 6 to the condensed financial statements of the Trust in this Form 10-Q, certain conditions raise substantial doubt about the Trust’s ability to continue as a going concern. The Trustee’s plans concerning this matter are also discussed in Note 6 to the financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Impairment

Termination and Liquidation of the Trust

The Trust will terminate upon the occurrence of: (i) an affirmative vote of the holders of not less than 66 2/3 percent of the outstanding Units to terminate the Trust; (ii) such time as the ratio of the cash amounts received by the Trust attributable to the Royalty Interests in any calendar quarter to administrative costs of the Trust for such calendar quarter is less than 1.2 to 1.0 for two consecutive calendar quarters; or (iii) March 1 of any year if it is determined, based on a reserve report as of December 31 of the prior year prepared by a firm of independent petroleum engineers mutually selected by the Trustee and the Company, that the net present value (discounted at 10 percent) of estimated future net revenues from proved reserves attributable to the Royalty Interests plus the amount of all remaining Section 29 tax credits attributable to the Royalty Interests is equal to or less than $5 million (as applicable, the “Termination Date”). Upon such occurrence causing the Trust to terminate, the remaining assets of the Trust will be sold, the net proceeds of the sale will be distributed to Unitholders and the Trust will be wound up and a certificate of cancellation filed. With respect to (ii) above, the ratio of cash amounts received to administrative costs for the first, second and third quarters of 2015 were 6.3 to 1.0, 2.8 to 1.0 and 0 to 1.0, respectively, and with (iii) above, the net present value of the estimated future net revenues computed as described above by the independent petroleum engineers as of December 31, 2014 was approximately $27.5 million. While the results of these computations will not trigger an early termination of the Trust as of September 30, 2015, if Walter Energy, Inc. does not pay a distribution to the Trust during the fourth quarter of 2015, this will cause the Trust’s ratio of cash received to administrative costs to fall below 1.2 to 1.0 for a second consecutive calendar quarter in 2015, and, accordingly, result in an early termination of the Trust. The Trust had not received any proceeds from Walter Energy, Inc. as of November 23, 2015, the filing date of this Form 10-Q; therefore, there will not be a distribution made to Unitholders of record on November 30, 2015. See also “Item 1A — Risk Factors” in the Trust’s Form 10-K for the year ended December 31, 2014.

Upon the termination of the Trust, the Trustee is to use its best efforts to sell any remaining Royalty Interests then owned by the Trust for cash pursuant to the procedures described in the Trust Agreement. Within five business days following the Termination Date, the Trustee is to provide written notice of termination to the Company, Dominion Resources and the Delaware Trustee. The Trustee is to retain a nationally recognized investment banking firm (the “Advisor”) on behalf of the Trust who is to assist the Trustee in selling the remaining Royalty Interests. The Company has the right, but not the obligation, within 60 days following the Termination Date, to make a cash offer to purchase all of the remaining Royalty Interests then held by the Trust. In the event such an offer is made by the Company, the Trustee is to decide, based on the recommendation of the Advisor, to either (i) accept such offer (in which case no sale to the Company is to be made unless a fairness opinion is given by the Advisor that the purchase price is fair to Unitholders) or (ii) defer action on the offer for approximately 60 days and seek to locate other buyers for the remaining Royalty Interests. If the Trustee defers action on the Company’s offer, the offer will be deemed withdrawn and the Trustee is to then use its best efforts, assisted by the Advisor, to locate other buyers for the Royalty Interests. At the end of the 120-day period following the Termination Date, the Trustee is to notify the Company of the highest of any other offers acceptable to the Trustee (which must be an all-cash offer) received during such period (such price, net of any commissions or other fees payable by the Trust, the “Highest Acceptable Offer”). The Company then has the right (whether or not it made an initial offer), but not the obligation, to purchase all remaining Royalty Interests for a cash purchase price computed as follows: (i) if the Highest Acceptable Offer is more than 105 percent of the Company’s original offer (or if the Company did not make an initial offer), the purchase price is to be 105 percent of the Highest Acceptable Offer, or (ii) if the Highest Acceptable Offer is equal to or less than 105 percent of the Company’s original offer, the purchase price is to be equal to the Highest Acceptable Offer. If no other acceptable offers are received for all remaining Royalty Interests, the Trustee may request the Company to submit another offer for consideration by the Trustee and may accept or reject such offer.

If a sale of the Royalty Interests is made or a definitive contract for sale of the Royalty Interests is entered into within a 150-day period following the Termination Date, the buyer of the Royalty Interests, and not the Trust or Unitholders, will be entitled to all proceeds of production attributable to the Royalty Interests following the Termination Date.

In the event that the Company does not purchase the Royalty Interests, the Trustee may accept any offer for all or any part of the Royalty Interests as it deems to be in the best interests of the Trust and Unitholders and may continue, for up to one calendar year after the Termination Date, to attempt to locate a buyer or buyers of the remaining Royalty Interests in order to sell such interests in an orderly fashion. If the Royalty Interests have not been sold or a definitive agreement for sale has not been entered into by the end of such calendar year, the Trustee is required to sell the remaining Royalty Interests at a public auction, which sale may be to the Company or any of its affiliates.

The Company’s purchase rights, as described above, may be exercised by the Company and each of its successors in interest and assigns. The Company’s purchase rights are fully assignable by the Company to any person or entity. The costs of liquidation, including the fees and expenses of the Advisor and the Trustee’s liquidation fee, will be paid by the Trust.

The Trust may terminate without Unitholder approval. Unitholders are not entitled to any rights of appraisal or similar rights in connection with the termination of the Trust. The sale of the remaining Royalty Interests and the termination of the Trust will be taxable events to the Unitholders. Generally, a Unitholder will realize gain or loss equal to the difference between the amount realized on the sale and termination of the Trust and the adjusted basis of such Units. The amount realized by the Trust upon termination will be allocated to Unitholders in the same manner as the Trustee allocates the income received by the Trust. Gain or loss realized by a Unitholder who is not a dealer with respect to such Units and who has a holding period for the Units of more than one year will be treated as long-term capital gain or loss except to the extent of any depletion recapture amount, which must be treated as ordinary income. Other federal and state tax issues concerning the Trust are discussed herein in Notes 3 and 4 of the Notes to condensed financial statements. Each Unitholder should consult his own tax advisor regarding Trust tax compliance matters, including federal and state tax implications concerning the sale of the Royalty Interests and the termination of the Trust.

Results of Operations

Three and Nine Month Periods Ended September 30, 2015 Compared to the Three and Nine Month Periods Ended September 30, 2014

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). 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 did not receive any royalty income during the third quarter of 2015 compared to $1,848,299 during the third quarter of 2014. This 2014 royalty income was derived from the receipt of cash on production of 428 Mmcf at an average price received of $4.32 per mcf after deducting production taxes of $119,336 in the third quarter of 2014.

The Trust received royalty income amounting to $2,747,134 during the nine months ended September 30, 2015 compared to $5,395,991 during the nine months ended September 30, 2014. This revenue was derived from the receipt of cash on production of 839 Mmcf at an average price received of $3.27 per mcf after deducting production taxes of $168,398 in the nine months ended September 30, 2015 compared to 1,330 Mmcf at an average price received of $4.05 per mcf after deducting production taxes of $344,623 in the nine months ended September 30, 2014.

For the three and nine-month periods ended September 30, 2015, in addition to not receiving a distribution to the Trust representing payment of Royalty Interests for the production months of April through September 2015 the Trust was negatively impacted by the decrease in natural gas production and by lower gas prices, as compared with the three and nine-month periods ended September 30, 2014. Natural gas prices are influenced by many factors such as seasonal temperatures, domestic demand and other factors that are beyond the control of the Trustee. Production taxes are based on revenues rather than production volumes. Accordingly, production taxes did not fluctuate proportionately to the decrease in volumes.

Interest income during the third quarter of 2015 amounted to $4 compared to $26 for the same period in 2014. Interest income during the nine months ended September 30, 2015 amounted to $31 compared to $176 for the nine months ended September 30, 2014. The decrease in interest income in the third quarter of 2015 as compared to the third quarter of 2014 is primarily due to the lack of funds to invest and earn interest.

General and administrative expenses during the third quarter of 2015 amounted to $640,054 compared to $273,993 in the third quarter of 2014. General and administrative expenses during the nine months ended September 30, 2015 amounted to $1,307,904 compared to $956,037 for the nine months ended September 30, 2014. For these periods, these expenses were primarily related to general and administrative services provided by Walter Exploration & Production, the Trustee and American Stock Transfer & Trust Company, the transfer agent, the preparation of periodic reports for submission to the SEC and to Unitholders during the period and legal fees related to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q. The increase in general and administrative expenses in the third quarter of 2015 as compared to the third quarter of 2014 is primarily legal fees related to the Walter Energy bankruptcy proceeding.

The distributable loss for the third quarter of 2015 was $640,050, or a loss of $0.08 per Unit, compared to distributable income for the third quarter of 2014 of $1,574,332, or $0.20 per Unit. Distributable income for the nine months ended September 30, 2015 was $1,439,261, or $0.18 per Unit, compared to $4,440,130, or $0.57 per Unit for the nine months ended September 30, 2014. As a result of rulings by the Bankruptcy Court related to the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q, the Trust does not anticipate making any further distributions in 2015.

Critical Accounting Policies and Estimates

The Trust’s financial statements reflect the selection and application of accounting policies that require the Trust to make significant estimates and assumptions. The following are some of the more critical judgment areas in the application of accounting policies that currently affect the Trust’s financial condition and results of operations.

Basis of Accounting

•

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.

•

Impairment of the Royalty Interests is charged directly to the trust corpus when incurred.

•

Distributions to Unitholders are recorded when declared by the Trustee (see Note 5 to the condensed financial statements).

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. This comprehensive basis of accounting other than accounting principles generally accepted in the United States of America corresponds to the accounting permitted for royalty trusts by the SEC, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

Impairment

Revenue Recognition

Revenues from Royalty Interests are recognized in the period in which amounts are received by the Trust. Royalty income received by the Trust in a given calendar year will generally reflect the proceeds, on an entitlements basis, from natural gas produced and sold for the twelve-month period ended September 30th in that calendar year. Royalty income received by the Trust in the third quarter of 2015 generally reflects the proceeds, on an entitlements basis, from natural gas produced and sold in the second quarter of 2015.

Reserve Disclosure

Independent petroleum engineers estimate the net proved reserves attributable to the Royalty Interests. In accordance with FASB guidance, estimates of future net revenues from proved reserves have been prepared using the average market gas prices over the prior 12-month period or applicable contract price as of December 31, as appropriate, and related costs. Numerous uncertainties are inherent in estimating volumes and the value of proved reserves and in projecting future production rates and the timing of development of non-producing reserves. Such reserve estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production may be substantially different from the reserve estimates.

Contingencies

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unitholders. The Trustee is aware of no such items as of September 30, 2015, other than as set forth in Note 6 to the condensed financial statements of the Trust appearing elsewhere in this Form 10-Q.

Use of Estimates

The preparation of financial statements in conformity with the basis of accounting described above requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting period. Actual results may differ from such estimates.

Distributable Income Per Unit

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the Trust’s financial statements.

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 (the “Exchange Act”). 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, industry conditions and the Walter Energy, Inc. bankruptcy and its impact on the Trust, 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. 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 ability to obtain such financing may be impaired as a result of the bankruptcy matter filed on behalf of the Debtors and its impact on the payment on the Royalty Interests 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. Funds held by the Trust pending distribution to Unitholders and in reserve for the payment of Trust expenses and liabilities are invested in a fund that holds only U.S. Treasury Securities. Additionally, the Trust’s future royalty income may be subject to risks relating to the creditworthiness of the operators of the Underlying Properties and other purchasers of crude oil and natural gas produced from the Underlying Properties, as well as risks associated with fluctuations in the price of crude oil and natural gas. See Note 6 to the condensed financial statements of the Trust appearing elsewhere in this Form 10-Q for additional information regarding the bankruptcy matter filed on behalf of the Debtors and its impact on the payment on the Royalty Interests to the Trust. See “Item 1A - Risk Factors - Future royalty income may be subject to risks relating to the creditworthiness of third parties” in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 23, 2015, which is accessible on the SEC’s website at www.sec.gov, and “Part II — Other Information — Item 1A. Risk Factors” below. The Trust does not engage in transactions in foreign currencies which could expose the Trust or Unitholders to any foreign currency related market risk.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, the Trustee carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures are effective in timely recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Trustee to allow timely decisions regarding required disclosure. In its evaluation of disclosure controls and procedures, the Trustee has relied, to the extent considered reasonable, on information provided by the Company. There has not been any change in the Trust’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see the information above in Note 6 to the condensed financial statements of the Trust in this Form 10-Q.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes from the risk factors previously disclosed under the heading “Item 1A. Risk Factors” in the Trust’s Annual Report filed on Form 10-K for the year ended December 31, 2014.

The Trust will be terminated upon the occurrence of certain events.

Pursuant to the terms of the Trust Agreement, the Trust will terminate upon the occurrence of: (i) an affirmative vote of the holders of not less than 66 2/3 percent of the outstanding Units to terminate the Trust; (ii) such time as the ratio of the cash amounts received by the Trust attributable to the Royalty Interests in any calendar quarter to administrative costs of the Trust for such calendar quarter is less than 1.2 to 1.0 for two consecutive calendar quarters; or (iii) March 1 of any year if it is determined, based on a reserve report as of December 31 of the prior year prepared by a firm of independent petroleum engineers mutually selected by the Trustee and the Company, that the net present value (discounted at 10 percent) of estimated future net revenues from proved reserves attributable to the Royalty Interests is equal to or less than $5 million. With respect to (ii) above, the ratio of cash amounts received to administrative costs for the first, second and third quarters of 2015 were 6.3 to 1.0, 2.8 to 1.0 and 0 to 1.0, respectively, and with (iii) above, the net present value of the estimated future net revenues computed as described above by the independent petroleum engineers as of December 31, 2014 was approximately $27.5 million. While the results of these computations will not trigger an early termination of the Trust as of September 30, 2015, if Walter Energy, Inc. does not pay a distribution to the Trust during the fourth quarter of 2015, this will cause the Trust’s ratio of cash received to administrative costs to fall below 1.2 to 1.0 for a second consecutive calendar quarter in 2015, and, accordingly, result in an early termination of the Trust. The Trust had not received any proceeds from Walter Energy, Inc. as of November 23, 2015, the filing date of this Form 10-Q. In addition, future computations are subject to the numerous uncertainties in estimating the future net revenues as described in “Item 1A — Risk Factors — Reserve estimates depend on many assumptions that may prove to be inaccurate, which could cause both estimated reserves and estimated future net revenues to be too high, leading to write-downs of estimated reserves” of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2014, including changes in pricing, costs and production volumes. Additionally, the Company notified the Trustee that it abandoned 11 wells in 2012, 11 wells in 2013, and 8 wells in 2014 as it considered them uneconomic and that it is continuing to study the economic viability of an additional 10 to 20 wells within the Underlying Properties in 2015, as a result of which the Company could decide to suspend production or abandon such additional wells. As a result, the ability of the Trust’s ratio of cash receipts to expenses or the ability of the reserves to exceed the threshold in the future is uncertain. Following termination, the Trustee will use best efforts to sell any remaining Royalty Interests then owned by the Trust and the net proceeds of any sale would be distributed to Unitholders. There is no assurance that any such sale will be on terms acceptable to all Unitholders. In the Trust’s Annual Report filed on Form 10-K for the year ended December 31, 2014, “Item 1 — Business — Description of the Trust — Termination and Liquidation of the Trust” discusses consequences including tax consequences that may result to Unitholders, in the event Trust assets are sold and the Trust is terminated.

Future royalty income may be subject to risks relating to the creditworthiness of third parties, including the Walter Energy, Inc. bankruptcy proceedings.

The Trust does not lend money and has limited ability to borrow money, which the Trustee believes limits the Trust’s risk from the credit markets. The Trust’s future royalty income, however, may be subject to risks relating

to the creditworthiness of the operators of the Underlying Properties and other purchasers of the natural gas produced from the Underlying Properties, as well as risks associated with fluctuations in the price of natural gas. For example, the Walter Energy bankruptcy proceeding described under Note 6 to the condensed financial statements of the Trust in this Form 10-Q may result in the cessation of royalty income to the Trust.

Items 2 through 5. Not applicable.

Item 6.

Exhibits.



3.1		Trust Agreement of Dominion Resources Black Warrior Trust dated as of May 31, 1994, by and among Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and NationsBank of Texas, N.A. (filed as Exhibit 3.1 to Dominion Resources, Inc.’s Registration Statement on Form S-3 (No. 33-53513), and incorporated herein by reference).

3.2		First Amendment of Trust Agreement of Dominion Resources Black Warrior Trust dated as of June 27, 1994, by and among Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and NationsBank, N.A. (as successor to NationsBank of Texas, N.A.) (filed as Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference).

31.1		Certification required by Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification required by Rule 13a-14(a) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

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:		Southwest Bank, in its capacity as trustee of Dominion Resources Black Warrior Trust and not in its individual capacity or otherwise

By:		/s/ RON E. HOOPER
		Ron E. Hooper
		SVP Royalty Trust Management

Date: November 23, 2015

(The Trust has no directors or executive officers.)

Index to Exhibits


Exhibit Number		Exhibit

3.1 —		Trust Agreement of Dominion Resources Black Warrior Trust dated as of May 31, 1994, by and among Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and NationsBank of Texas, N.A. (filed as Exhibit 3.1 to Dominion Resources, Inc.’s Registration Statement* on Form S-3 (No. 33-53513), and incorporated herein by reference).

3.2 —		First Amendment of Trust Agreement of Dominion Resources Black Warrior Trust dated as of June 27, 1994, by and among Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and NationsBank, N.A. (as successor to NationsBank of Texas, N.A.) (filed as Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference).

31.1 —		Certification required by Rule 13a-14(a) or Rule 15d-14(a).

32.1 —		Certification required by Rule 13a-14(a) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

*	On its own behalf and as sponsor of the Dominion Resources Black Warrior Trust

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company