-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VgAlvGTHUisVfO93+TKxegXKNYwC4EX5NlIwkSHvgYPNC5Als9XK9NMtZSkRUdcr ty+GSu93A5l6GCNN3ttheg== 0000919297-96-000059.txt : 19960816 0000919297-96-000059.hdr.sgml : 19960816 ACCESSION NUMBER: 0000919297-96-000059 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERMIAN BASIN ROYALTY TRUST CENTRAL INDEX KEY: 0000319654 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 756280532 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08033 FILM NUMBER: 96614142 BUSINESS ADDRESS: STREET 1: P O BOX 1317 CITY: FT WORTH STATE: TX ZIP: 76101 BUSINESS PHONE: 8173906905 MAIL ADDRESS: STREET 1: P O BOX 1317 CITY: FORTH WORTH STATE: TX ZIP: 76101 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 1996 Commission File No. 1-8033 PERMIAN BASIN ROYALTY TRUST Texas I.R.S. No. 75-6280532 NationsBank of Texas, N.A., Trust Department P. O. Box 1317 Fort Worth, Texas 76101 Telephone Number 817/390-6905 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Number of Units of beneficial interest of the Trust outstanding at August 14, 1996: 46,608,796 Page 1 of 12 PERMIAN BASIN ROYALTY TRUST PART I - FINANCIAL STATEMENTS Item 1. Financial Statements The condensed financial statements included herein have been prepared by NationsBank of Texas, N.A. as Trustee for the Permian Basin Royalty Trust, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Trust's latest annual report on Form 10-K. In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Permian Basin Royalty Trust at June 30, 1996, and the distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 1996 and 1995 have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year. Deloitte & Touche LLP, independent certified public accountants, has made a limited review of the condensed financial statements as of June 30, 1996 and for the three-month and six-month periods ended June 30, 1996 and 1995 included herein. -2- INDEPENDENT ACCOUNTANTS' REPORT NationsBank of Texas, N.A. as Trustee for the Permian Basin Royalty Trust: We have reviewed the accompanying condensed statement of assets, liabilities and trust corpus of the Permian Basin Royalty Trust as of June 30, 1996 and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 1996 and 1995. These financial statements are the responsibility of the Trustee. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, 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. The accompanying condensed financial statements are prepared on a modified cash basis as described in Note 1, which is a comprehensive basis of accounting other than generally accepted accounting principles. Based on our reviews, we are not aware of any material modifications that should be made to such condensed financial statements for them to be in conformity with the basis of accounting described in Note 1. We have previously audited, in accordance with generally accepted auditing standards, the statement of assets, liabilities and trust corpus of the Permian Basin Royalty Trust as of December 31, 1995, 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 22, 1996, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed statement of assets, liabilities and trust corpus as of December 31, 1995 is fairly stated, in all material respects, in relation to the statement of assets, liabilities and trust corpus from which it has been derived. DELOITTE & TOUCHE LLP August 1, 1996 -3- PERMIAN BASIN ROYALTY TRUST Condensed Statements of Assets, Liabilities and Trust Corpus ------------------------------------------------------------------------------
June 30, December 31, ASSETS 1996 1995 (Unaudited) Cash and short-term investments $ 1,854,456 $ 1,195,294 Net overriding royalty interests in producing oil and gas properties (net of accumulated amortization of $7,025,201 and $6,917,588 at June 30, 1996 and December 31, 1995) 3,950,015 4,057,628 ------------ ---------- $ 5,804,471 $ 5,252,922 ============ =========== LIABILITIES AND TRUST CORPUS Distribution payable to Unit holders $ 1,854,456 $ 1,195,294 Trust corpus - 46,608,796 Units of beneficial interest authorized and outstanding 3,950,015 4,057,628 ------------ ----------- $ 5,804,471 $ 5,252,922 ============ =========== Condensed Statements of Distributable Income (unaudited) ------------------------------------------------------------------------------ Three Months Ended Six Months Ended June 30, June 30, -------------------------- ------------------- 1996 1995 1996 1995 Royalty income $3,839,220 $2,251,940 $6,409,261 $5,426,356 Interest income 3,996 4,541 11,728 13,852 ------------ --------- ---------- --------- 3,843,216 2,256,481 6,420,989 5,440,208 General and administrative expenditures 143,348 132,460 267,756 282,042 ----------- ---------- ---------- ---------- Distributable income $3,699,868 $2,124,021 $6,153,233 $5,158,166 =========== ========== ========== ========== Distributable income per Unit (46,608,796 Units) $ .079382 $ .045571 $ .132019 $ .110668 ========== ========== ========== ========== The accompanying notes to condensed financial statements are an integral part of this statement. -4- PERMIAN BASIN ROYALTY TRUST Condensed Statements of Changes in Trust Corpus (unaudited) --------------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, ------------------------- -------------------------- 1996 1995 1996 1995 Trust corpus, beginning of period $4,009,018 $4,231,625 $4,057,628 $ 4,296,056 Amortization of net overriding royalty interests (59,003) (46,390) (107,613) (110,821) Distributable income 3,699,868 2,124,021 6,153,233 5,158,166 Distributions declared (3,699,868) (2,124,021) (6,153,233) (5,158,166) ---------- ---------- ---------- ---------- Trust corpus, end of period $3,950,015 $4,185,235 $3,950,015 $4,185,235 ========== ========== ========== ========== The accompanying notes to condensed financial statements are an integral part of this statement.
-5- PERMIAN BASIN ROYALTY TRUST NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------------------------------ 1. BASIS OF ACCOUNTING The Permian Basin Royalty Trust ("Trust") was established as of November 1, 1980. The financial statements of the Trust are prepared on the following basis: * Royalty income recorded for a month is the amount computed and paid by the interest owner, Burlington Resources Oil & Gas Company ("Burlington"), to NationsBank of Texas, N.A. ("Trustee") as Trustee for the Trust. Royalty income consists of the amounts received by the owner of the interest burdened by the net overriding royalty interests ("Royalties") from the sale of production less accrued production costs, development and drilling costs, applicable taxes, operating charges, and other costs and deductions multiplied by 75% in the case of the Waddell Ranch Properties and 95% in the case of the Texas Royalty Properties. * Trust expenses recorded are based on liabilities paid and cash reserves established out of cash received or borrowed funds for liabilities and contingencies. * Distributions to Unit holders are recorded when declared by the Trustee. * The conveyance which transferred the overriding royalty interest to the Trust provides that any excess of production costs over gross proceeds must be recovered from future net profits. The financial statements of the Trust differ from financial statements prepared in accordance with generally accepted accounting principles ("GAAP") because revenues are not accrued in the month of production and certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP. Amortization of the Royalties calculated on a unit-of-production basis is charged directly to trust corpus. 2. FEDERAL INCOME TAXES For Federal income tax purposes, the Trust constitutes a fixed investment trust which is taxed as a grantor trust. A grantor trust is not subject to tax at the trust level. The Unit holders are considered 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 Unit holder at the time such income is received or accrued by the Trust and not when distributed by the Trust. The Royalties constitute "economic interests" in oil and gas properties for Federal income tax purposes. Unit holders must report their share of the revenues of the Trust as ordinary income from oil and gas royalties and are entitled to claim depletion with respect to such income. The Trust has on file technical advice memoranda confirming the tax treatment described above. The classification of the Trust's income for purposes of the passive loss rules may be important to a Unit holder. As a result of the Tax Reform Act of 1986, royalty income will generally be treated as portfolio income and will not offset passive losses. * * * * * * -6- Item 2. Trustee's Discussion and Analysis Three Months Ended June 30, 1996 and 1995 In the quarter ended June 30, 1996, royalty income received by the Trust amounted to $3,839,220 compared to $2,251,940 during the second quarter of 1995. Interest income for the quarter ended June 30, 1996 was $3,996 compared to $4,541 during the second quarter of 1995. General and administrative expenses during the second quarter of 1996 amounted to $143,348 compared to $132,460 during the second quarter of 1995. The increase in general and administrative expenses can be attributed primarily to timing differences in the receipt and payment of these expenses. These transactions resulted in distributable income for the quarter ended June 30, 1996 of $3,699,868 or $.079382 per Unit of beneficial interest. Distributions of $.024986, $.014608 and $.039788 per Unit were made to Unit holders of record as of April 30, May 31 and June 28, 1996, respectively. For the second quarter of 1995, distributable income was $2,124,021 or $.045571 per Unit of beneficial interest. The Trust has been advised that effective January 1, 1996, Southland Royalty Company was merged with and into Meridian Oil Inc. ("Meridian"), a Delaware corporation, with Meridian being the surviving corporation. Meridian succeeded to the ownership of all the assets, has the rights, powers and privileges and assumed all of the liabilities and obligations of Southland. Effective July 11, 1996 Meridian changed its name to Burlington Resources Oil & Gas Company ("Burlington"). Royalty income for the Trust for the second quarter of the calendar year is associated with actual oil and gas production for the period February through April from the properties from which the Trust's net overriding royalty interests ("Royalties") were carved. Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows: Second Quarter ------------------------ 1996 1995 ROYALTIES: Oil Sales (Bbls) 153,105 115,981 Gas sales (Mcf) 511,774 313,252 PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED: Oil: Total oil sales (Bbls) 438,225 394,643 Average per day (Bbls) 4,870 4,434 Average price per Bbl $19.57 $17.13 Gas: Total gas sales (Mcf) 1,815,559 1,905,662 Average per day (Mcf) 20,173 21,412 Average price per Mcf $2.15 $1.45 The posted price of oil increased for the second quarter of 1996 compared to the second quarter of 1995, resulting in an average price per barrel of $19.57 compared to $17.13 in the second quarter of 1995. The Trust has been advised by Burlington that for the period August1, 1993 through June 30, 1997, the oil from the Waddell Ranch is being sold under a competitive bid to a third party. The increase in the average price of gas from $1.45 in the second quarter of 1995 to $2.15 in the second quarter of 1996 is primarily the result of an increase in the spot prices of natural gas. -7- Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), those production amounts do not provide a meaningful comparison. The increase in oil sales from the properties from which the Royalties were carved is primarily a result of a 20% increase in production from the Waddell Ranch properties due to successful drilling, remedial and maintenance programs offset by the natural decline in production from the Texas Royalty properties. The gas sales from the properties from which the Royalties were carved were relatively unchanged for the second quarter of 1996 compared to the second quarter of 1995. Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second quarter of 1996 totaled $4 million as compared to $3.6 million for the second quarter of 1995. Burlington has informed the Trust that the 1996 capital expenditures budget is $9.6 million, of which $8.4 million has been expended through the second quarter of 1996. The total amount of capital expenditures for 1995 was $10.5 million. The Trust has been advised by Burlington that there were 16 gross (6.4 net) wells drilled and completed during the three months ended June 30, 1996 and there were 2 gross (1.0 net) wells in progress. During the three months ended June 30, 1995, there were 9 gross (3.625 net) wells completed and there were 7 gross (3.5 net) wells in progress. Lease operating expense and property taxes totaled $3.1 million for the second quarter of 1996 compared to $2.8 million in the second quarter of 1995. This increase is primarily attributable to an increase in lease operating expense on the Waddell Ranch properties due to an increased number of wells operated. Six Months Ended June 30, 1996 and 1995 For the six months ended June 30, 1996, royalty income received by the Trust amounted to $6,409,261 compared to royalty income of $5,426,356 for the six months ended June 30, 1995. Interest income for the six months ended June 30, 1996 was $11,728 compared to $13,852 during the six months ended June 30, 1995. General and administrative expenses for the six months ended June 30, 1996 were $267,756. During the six months ended June 30, 1995, general and administrative expenses were $282,042. The decrease in general and administrative expenses is primarily due to timing differences in the receipt and payment of these expenses. These transactions resulted in distributable income for the six months ended June 30, 1996 of $6,153,233 or $.132019 per Unit. For the six months ended June 30, 1995, distributable income was $5,158,166 or $.110668 per Unit. -8- Royalty income for the Trust for the period ended June 30, 1996 is associated with actual oil and gas production for the period November 1995 through April 1996 from the properties from which the Royalties were carved. Oil and gas production attributable to the Royalties and the properties from which the Royalties were carved are as follows: First Six Months ------------------------ 1996 1995 ROYALTIES: Oil Sales (Bbls) 281,205 274,108 Gas sales (Mcf) 854,812 827,201 PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED: Oil: Total oil sales (Bbls) 889,258 794,130 Average per day (Bbls) 4,886 4,387 Average price per Bbl $18.34 $16.53 Gas: Total gas sales (Mcf) 3,606,650 3,739,645 Average per day (Mcf) 19,817 20,661 Average price per Mcf $2.0 $1.60 The average price of oil increased during the six months ended June 30, 1996, compared to the same period in 1995, $18.34 per barrel as compared to $16.53 per barrel. The increase in the average price of oil is primarily due to increases in the posted price for oil. The increase in the average price of gas from $1.60 per Mcf for the six months ended June 30, 1995 to $2.04 per Mcf for the six months ended June 30, 1996 is primarily the result of an increase in the spot prices of natural gas. Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts do not provide a meaningful comparison. The increase in oil sales from the properties from which the Royalties were carved is primarily a result of an 18% increase in production from the Waddell Ranch properties due to successful drilling, remedial and maintenance programs. The gas sales from the properties from which the Royalties are carved were relatively unchanged for the applicable period of 1996 compared to 1995. The Trust has been advised by Burlington that 20 gross (8.3 net) productive oil wells on the Waddell Ranch properties were drilled and completed during the six months ended June 30, 1996, and that 13 gross (5.5 net) productive oil wells on the Waddell Ranch properties were drilled and completed during the six months ended June 30, 1995. Capital expenditures in 1996 totalled $8,373,000 compared to $6,064,000 in 1995. Burlington has previously advised the Trust that the 1996 capital expenditures budget should total approximately $9.6 million. Lease operating expense and property tax on the Waddell Ranch properties increased from $4,935,000 in 1995 to $5,462,000 in 1996. The increase in lease operating expense was primarily due to an increase in the number of wells operated. Property tax on the Texas Royalty properties increased from $681,000 in 1995 to $958,000 in 1996. This increase was primarily due to general increases in ad valorem tax rates. The Trust was advised by Burlington that approximately $1.3 million in ad valorem taxes related to 1991 through 1994 for the Texas Royalty properties that Southland did not previously charge to gross proceeds attributable to the Trust would be charged to the Trust over 12 months beginning in March 1995. This charge was being made by Burlington deducting approximately $87,000 per month from the gross proceeds -9- attributable to the Texas Royalty properties until the full amount of the ad valorem was recovered in February 1996. CALCULATION OF ROYALTY INCOME The Trust's royalty income is computed as a percentage of the net profit from the operation of the properties in which the Trust owns net overriding royalty interests. These percentages of net profits are 75% and 95% in the case of the Waddell Ranch Properties and the Texas Royalty Properties, respectively. Royalty income received by the Trust for the three months ended June 30, 1996 and 1995 respectively, were computed as shown in the table below:
Three Months Ended June 30, ------------------------------------------------------- 1996 1995 --------------------------- ------------------------- Waddell Texas Waddell Texas Ranch Royalty Ranch Royalty Properties Properties Properties Properties Gross proceeds of sales from properties from which the net overriding royalties were carved: Gas proceeds $ 6,799,341 $ 1,778,813 $ 4,955,839 $1,802,505 Oil proceeds 3,446,552 456,843 2,456,989 306,720 ------------ ----------- ----------- --------- Total 10,245,893 2,235,656 7,412,828 2,109,225 ------------ ----------- ----------- --------- Less: Severance tax: Oil 274,739 71,389 208,499 83,595 Gas 252,806 28,682 182,908 21,522 Lease operating expense and property tax: Oil and gas 2,657,089 482,511 2,335,324 460,261 Capital expenditures 4,036,192 3,639,049 ------------ --------- ---------- -------- Total 7,220,826 582,582 6,365,780 565,378 ------------ --------- ---------- --------- Net profits 3,025,067 1,653,074 1,047,048 1,543,847 Net overriding royalty interest 75% 95% 75% 95% ------------ --------- --------- ---------- Royalty income $ 2,268,800 $ 1,570,420 $ 785,286 $ 1,466,654 ============ =========== ========= ===========
-10- PART II - OTHER INFORMATION Items 1 through 5. Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4)(a) Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company (now Burlington Resources Oil & Gas Company) and The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. (4)(b) Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland Royalty Company (now Burlington Resources Oil & Gas Company) to The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(b) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. (4)(c) Net Overriding Royalty Conveyance (Permian Basin Royalty Trust - Waddell Ranch) from Southland Royalty Company (now Burlington Resources Oil & Gas Company) to The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(c) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. (27) Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 30, 1996. -11- 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. NATIONSBANK OF TEXAS, N.A. TRUSTEE FOR THE PERMIAN BASIN ROYALTY TRUST By /s/ PAMELA J. BRADLEY ------------------------ Pamela J. Bradley Vice President Date: August 14, 1996 (The Trust has no directors or executive officers.) -12- INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Exhibit Page (4)(a) Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company (now Burlington Resources Oil & Gas Company) and The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. * (b) Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland Royalty Company (now Burlington Resources Oil & Gas Company) to The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(b) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. * (c) Net Overriding Royalty Conveyance (Permian Basin Royalty Trust - Waddell Ranch) from Southland Royalty Company (now Burlington Resources Oil & Gas Company) to The First National Bank of Fort Worth (now NationsBank of Texas, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(c) to the Trust's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980 is incorporated herein by reference. * (27) Financial Data Schedule ** * A copy of this Exhibit is available to any Unit holder, at the actual cost of reproduction, upon written request to the Trustee, NationsBank of Texas, N.A., P. O. Box 1317, Fort Worth, Texas 76101. ** Filed herewith. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS OF PERMIAN BASIN ROYALTY TRUST AS OF JUNE 30, 1996, AND THE RELATED CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME AND CHANGES IN TRUST CORPUS FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 1996. 1 6-MOS DEC-31-1996 JUN-30-1996 1,854,456 0 0 0 0 1,854,456 10,975,216 7,025,201 5,804,471 1,854,456 0 0 0 0 3,950,015 5,804,471 0 3,843,216 0 0 143,348 0 0 3,699,868 0 3,699,868 0 0 0 3,699,868 0 0
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