-----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, SuEPbqIwS/fpkUp10yy8CcQi8FBQXYxnwSLnQ9aG1KeAekaMRUB3lpr/gNDfbwSe U1tujIK7LJhd9LQO6tYzCw== 0001025970-99-000007.txt : 19990816 0001025970-99-000007.hdr.sgml : 19990816 ACCESSION NUMBER: 0001025970-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 001-08033 FILM NUMBER: 99688493 BUSINESS ADDRESS: STREET 1: BANK OF AMERICA N A TRUST DEPARTMENT STREET 2: P O BOX 1317 NK OF TEXAS NA TRUST DEPT CITY: FT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173906905 MAIL ADDRESS: STREET 1: 1300 SUMMIT AVENUE SUITE 300 CITY: FORTH WORTH STATE: TX ZIP: 76102 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, 1999 Commission File No. 1-8033 PERMIAN BASIN ROYALTY TRUST Texas I.R.S. No. 75-6280532 Bank of America, 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 13, 1999: 46,608,796 Page 1 of 17 PERMIAN BASIN ROYALTY TRUST PART I - FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS The condensed financial statements included herein have been prepared by Bank of America, 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, 1999, and the distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 1999 and 1998 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, 1999 and for the three-month and six-month periods ended June 30, 1999 and 1998 included herein. -2- INDEPENDENT ACCOUNTANTS' REPORT Bank of America, 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, 1999 and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 1999 and 1998. 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, 1998, 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 8, 1999, 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, 1998 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 July 16, 1999 -3-
PERMIAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS - ----------------------------------------------------------------------------- June 30, December 31, ASSETS 1999 1998 (Unaudited) Cash and short-term investments $1,442,397 $ 525,193 Net overriding royalty interests in producing oil and gas properties (net of accumulated amortization of $7,891,611 and $7,837,301 at June 30, 1999 and December 31, 1998, respectively) 3,137,915 3,336,583 --------- --------- $4,580,312 $3,861,776 ========= ========= LIABILITIES AND TRUST CORPUS Distribution payable to Unit holders $1,442,397 $ 525,193 Commitments and contingencies Trust corpus - 46,608,796 Units of beneficial interest authorized and outstanding 3,137,915 3,336,583 --------- --------- $4,580,312 $3,861,776 ========= ========= CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) - ----------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ---------------------------- 1999 1998 1999 1998 Royalty income $3,957,301 $1,599,573 $5,733,261 $6,852,540 Interest income 4,988 7,045 7,001 17,913 --------- --------- --------- --------- 3,962,289 1,606,618 5,740,262 6,870,453 General and administrative expenditures 116,677 148,573 260,340 273,002 --------- --------- --------- --------- Distributable income $3,845,612 $1,458,045 $5,479,922 $6,597,451 ========= ========= ========= ========= Distributable income per Unit (46,608,796 Units) $ .082509 $ .031283 $ .117573 $ .141550 ========= ========= ========= ========= The accompanying notes to condensed financial statements are an integral part of these statements.
-4-
PERMIAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) - ---------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, ---------------------------- --------------------------- 1999 1998 1999 1998 Trust corpus, beginning of period $3,281,601 $3,444,230 $3,336,583 $3,496,594 Amortization of net overriding royalty interests (143,686) (32,859) (198,668) (85,223) Distributable income 3,845,612 1,458,045 5,479,922 6,597,451 Distributions declared (3,845,612) (1,458,045) (5,479,922) (6,597,451) ---------- ---------- ----------- ---------- Trust corpus, end of period $3,137,915 $3,411,371 $3,137,915 $3,411,371 ========== ========== ========== ========== 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 net overriding royalties conveyed to the Trust include: (1) a 75% net overriding royalty carved out of Southland Royalty Company's fee mineral interests in the Waddell ranch in Crane County, Texas (the "Waddell Ranch properties"); and (2) a 95% net overriding royalty carved out of Southland Royalty Company's major producing royalty interests in Texas (the "Texas Royalty properties"). The net overriding royalty for the Texas Royalty properties is subject to the provisions of the lease agreements under which such royalties were created. The financial statements of the Trust are prepared on the following basis: * Royalty income recorded for a month is the amount computed and paid to Bank of America, N.A. ("Trustee") as Trustee for the Trust by the interest owners: Burlington Resources Oil & Gas Company ("BROG") for the Waddell Ranch properties and Riverhill Energy Corporation ("Riverhill Energy"), formerly a wholly owned subsidiary of Riverhill Capital Corporation ("Riverhill Capital") and formerly an affiliate of Coastal Management Corporation ("CMC"), for the Texas Royalty properties. CMC currently conducts all field, technical and accounting operations on behalf of BROG with regard to the Waddell Ranch properties. CMC also conducts the accounting operations for the Texas Royalty properties on behalf of Riverhill Energy. Royalty income consists of the amounts received by the owners 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. As was previously reported, in February 1997, BROG sold its interest in the Texas Royalty properties to Riverhill Energy. The Trustee has been advised that in the first quarter of 1998 Schlumberger Technology Corporation ("Schlumberger") acquired all of the shares of stock of Riverhill Capital. Prior to such acquisition by Schlumberger, CMC and Riverhill Energy were wholly owned subsidiaries of Riverhill Capital. The Trustee has further been advised that in connection with Schlumberger's acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy. Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill Energy, the stock ownership of which was acquired by the former shareholders of Riverhill Capital. * 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. * Royalty income is computed separately for each of the conveyances under which the Royalties were conveyed to the Trust. If monthly costs exceed revenues for any conveyance ("excess costs"), such excess cannot reduce royalty income from other conveyances, but is carried forward with accrued interest to be recovered from future net proceeds of that conveyance (see Note 3). 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 -6- 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. 3. EXCESS COSTS In the calculation of royalty income for the month of June 1998, costs exceeded revenues for the Waddell Ranch properties underlying the Waddell Ranch Net Overriding Royalty Conveyance by $396,012. Such excess costs were recovered from net proceeds of the underlying Waddell Ranch properties during the first quarter of 1999 and these properties are again contributing Trust royalty income. 4. SUBSEQUENT EVENT On July 5, 1999, NationsBank, N.A., Trustee of the Permian Basin Royalty Trust, legally changed its name to Bank of America, N.A. On July 23, 1999, Bank of America, N.A. (formerly known as NationsBank, N.A.) was merged with and into Bank of America NT&SA, with the resulting entity being called Bank of America, N.A. As a result, immediately following the close of business on July 23, 1999, the remaining legal entity was Bank of America, N.A. As a result of such merger, the Trustee of the Trust is Bank of America, N.A., successor by merger to NationsBank, N.A. ****** -7- ITEM 2. TRUSTEE'S DISCUSSION AND ANALYSIS FORWARD LOOKING INFORMATION Certain information included in this report contains, and other materials filed or to be filed by the Trust with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Trust) may contain or include, forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such forward looking statements may be or may concern, among other things, capital expenditures, drilling activity, development activities, production efforts and volumes, hydrocarbon prices and the results thereof, and regulatory matters. Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct. There are many factors, none of which is within the Trustee's control, that may cause such expectations not to be realized, including, among other things, factors such as actual oil and gas prices and the recoverability of reserves, capital expenditures, general economic conditions, actions and policies of petroleum-producing nations and other changes in the domestic and international energy markets. Such forward looking statements generally are accompanied by words such as "estimate," "expect," "predict," "anticipate," "goal," "should," "assume," "believe," or other words that convey the uncertainty of future events or outcomes. YEAR 2000 ISSUE Many existing computer programs use only two digits to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by the Year 2000. The Year 2000 issue affects virtually all companies and organizations. If a company or organization does not successfully address its Year 2000 issues, it may face material adverse consequences. As the Trust does not directly maintain any systems, the Trust will not incur any direct costs related to the Year 2000 issue. The Trustee has identified those vendors it believes could have an impact on its day-to-day operations if their operations were interrupted as a result of Year 2000 problems. The Trustee has made formal inquiries to these vendors requesting information on their state of readiness for the Year 2000. Through responses received and other literature reviewed by the Trustee with respect to its vendors, the Trustee believes that all significant vendors are currently addressing the Year 2000 issue and plan to be compliant prior to the Year 2000. The Trustee has no reason to believe that its vendors will not be Year 2000 compliant. In the event the Trustee learns that a vendor's system will not be Year 2000 compliant, the Trustee will assess the potential risk and develop contingency plans at that time. The Trust is a passive entity with no business operations and the information technology systems ("IT") employed by the Trustee in connection with its duties on behalf of the Trust are less extensive than the systems employed by many business entities. The Trust has no formal IT budget and the Trustee does not anticipate making any expenditures relating to the Trustee's IT systems used in connection with the Trust during 1999. -8- Because the royalty interests held by the Trust are fixed, the Trustee is dependent upon the third parties that hold operating interests with respect thereto for the receipt of royalty income. Thus, if any such third party failed to deliver royalty income, the Trustee would have no alternative source for such income. The Trustee believes that the worst case scenario would be the failure by one or more of the third parties who pay royalties to the Trust or who make distributions to Unit holders for the Trust to identify and remediate Year 2000 problems on a timely basis, which could cause the Trustee to be unable to make required distributions to Unit holders. With respect to a failure by a third party to deliver royalty income or make distributions to Unit holders on a timely basis, the Trustee believes that it would have no control over the efforts of such third party to correct the problems, and significant delays in the receipt of royalty income and distributions to Unit holders could result. There can be no guarantee that the Trustee will be able to identify all potential Year 2000 problems or fully remediate all Year 2000 problems identified on a timely basis. There can be no assurance that the systems of the Trustee or third party vendors on which the Trust relies will be timely remediated. The failure by the Trustee or any such third party to fully remediate its Year 2000 problems on a timely basis could have a material adverse affect on the Trustee's ability to receive revenue, account for and make timely distribution of the Trust's distributable income. Certain of the statements made above regarding the Trustee's Year 2000 program are forward looking statements, and there can be no assurance that the Trustee will be able to achieve Year 2000 compliance in the manner and by the dates indicated above. THREE MONTHS ENDED JUNE 30, 1999 AND 1998 For the quarter ended June 30, 1999, royalty income received by the Trust amounted to $3,957,301 compared to royalty income of $1,599,573 during the second quarter of 1998. The increase in royalty income is primarily due to lower capital expenditures. In the calculation of royalty income for the month of June 1998, costs exceeded revenues for the Waddell Ranch properties underlying the Waddell Ranch Net Overriding Royalty Conveyance by $396,012. Such excess costs were recovered from net proceeds of the underlying Waddell Ranch properties during the first quarter of 1999 and these properties are again contributing trust royalty income. Interest income for the quarter ended June 30, 1999, was $4,988, compared to $7,045 during the second quarter of 1998. The decrease in interest income is attributable primarily to a decrease in funds available for investment. General and administrative expenses during the second quarter of 1999 amounted to $116,677, compared to $148,573 during the second quarter of 1998. The decrease in general and administrative expenses can be attributed primarily to cost reduction efforts by the trustee and timing differences in the receipt and payment of these expenses. These transactions resulted in distributable income for the quarter ended June 30, 1999, of $3,845,612 or $.082509 per Unit of beneficial interest. Distributions of $.023665, $.027897 and $.030947 per Unit were made to Unit holders of record as of April 30, May 30 and June 30, 1999, respectively. For the second quarter of 1998, distributable income was $1,458,045 or $.031283 per Unit of beneficial interest. -9- 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 1999 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 --------------------- 1999 1998 ROYALTIES: Oil sales (Bbls) 230,223 88,938 Gas sales (Mcf) 820,461 252,416 PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED: Oil: Total oil sales (Bbls) 430,636 468,233 Average per day (Bbls) 4,839 5,261 Average price per Bbl $11.88 $12.71 Gas: Total gas sales (Mcf) 1,706,705 1,755,962 Average per day (Mcf) 19,176 19,730 Average price per Mcf $1.70 $2.15 The posted price of oil decreased for the second quarter of 1999, compared to the second quarter of 1998, resulting in an average price per barrel of $11.88, compared to $12.71 in the second quarter of 1998. The Trust has been advised by BROG that for the period August 1, 1993, through June 30, 1999, the oil from the Waddell Ranch properties was being sold under a competitive bid to a third party. The decrease in the average price of gas from $2.15 in the second quarter of 1998 to $1.70 in the second quarter of 1999 is primarily the result of a decrease 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 in the Royalties section of the above table do not provide a meaningful comparison. The oil and gas sales from the properties from which the Royalties are carved decreased slightly for the applicable period in 1999 compared to 1998. Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second quarter of 1999 totaled $57,000 as compared to $4.5 million for the second quarter of 1998. Through the second quarter of 1999, capital expenditures of $517,000 have been expended. BROG has informed the Trust that the remaining 1999 capital expenditures budget has been revised to $1.89 million for the Waddell Ranch. The total amount of capital expenditures for 1998 was $15.9 million. The Trust has been advised that there were no wells completed or in progress during the three months ended June 30, 1999 on the Waddell Ranch properties. For the three months ended June 30, 1998, there were 20 gross (7 net) wells completed and there were 21 gross (8.125 net) wells in progress. Lease operating expense and property taxes totaled $2.6 million for the second quarter of 1999, compared to $3.8 million in the second quarter of 1998 on the Waddell Ranch properties. This decrease is primarily due to more efficient field operations on the Waddell Ranch properties. -10- SIX MONTHS ENDED JUNE 30, 1999 AND 1998 For the six months ended June 30, 1999, royalty income received by the Trust amounted to $5,733,261 compared to royalty income of $6,852,540 for the six months ended June 30, 1998. The decrease in royalty income is primarily due to a decrease in oil and gas prices in the first six months of 1999, compared to the first six months in 1998, as well as a decrease in allocated capital expenditures in the first six months of 1999. In the calculation of royalty income for the month of June 1998, costs exceeded revenues for the Waddell Ranch properties underlying the Waddell Ranch Net Overriding Royalty Conveyance by $396,012. Such excess costs were recovered from net proceeds of the underlying Waddell Ranch properties during the first quarter of 1999 and these properties are again contributing trust royalty income. Included in the distributable income for March 1998 was approximately $1.1 million which represented the Trust's portion of an approximate $1.5 million severance tax refund received from the State of Texas by BROG, operator of record of the Waddell Ranch properties in Crane County, Texas. Interest income for the six months ended June 30, 1999 was $7,001 compared to $17,913 during the six months ended June 30, 1998. The decrease in interest income is attributable primarily to a decrease in funds available for investment. General and administrative expenses for the six months ended June 30, 1999 were $260,340. During the six months ended June 30, 1998, general and administrative expenses were $273,002. 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, 1999 of $5,479,922 or $.117573 per Unit. For the six months ended June 30, 1998, distributable income was $6,597,451 or $.141550 per Unit. Royalty income for the Trust for the period ended June 30, 1999 is associated with actual oil and gas production for the period November 1998 through April 1999 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 ------------------------ 1999 1998 ROYALTIES: Oil sales (Bbls) 353,921 258,828 Gas sales (Mcf) 1,255,623 1,015,594 PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED: Oil: Total oil sales (Bbls) 885,262 903,710 Average per day (Bbls) 4,891 4,993 Average price per Bbl $ 10.78 $ 14.33 Gas: Total gas sales (Mcf) 3,534,007 3,538,550 Average per day (Mcf) 19,525 19,550 Average price per Mcf $ 1.76 $ 2.32 The average price of oil decreased during the six months ended June 30, 1999, compared to the same period in 1998, $10.78 per barrel as compared to $14.33 per barrel. The decrease in the average price of oil is primarily due to decreases in the posted price for oil. The decrease in the average price of gas from $2.32 per Mcf for the six months ended June 30, 1998 to $1.76 per Mcf for the six months ended June 30, 1999 is primarily the result of a decrease 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 in the Royalties -11- section of the above table do not provide a meaningful comparison. The oil and gas sales from the properties from which the Royalties are carved were relatively unchanged for the applicable period of 1999 compared to 1998. The Trust has been advised that 6 gross (2.63 net) productive oil wells on the Waddell Ranch properties were drilled and completed during the six months ended June 30, 1999, and that 36 gross (13.62 net) productive oil wells on the Waddell Ranch properties were drilled and completed during the six months ended June 30, 1998. Capital expenditures for the Waddell Ranch properties for the six months ended June 30, 1999 totaled $517,000 compared to $7.5 million for the same period in 1998. BROG has previously advised the Trust that the remaining 1999 capital expenditures budget for the Waddell Ranch properties is $1.89 million. Lease operating expense and property taxes totaled $5.7 million in 1999 compared to $6.6 million in 1998. The decrease in lease operating expense is primarily attributable to more efficient field operations on the Waddell Ranch properties. -12- 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, 1999 and 1998 respectively, were computed as shown in the table below:
Three Months Ended June 30, --------------------------------------------------------- 1999 1998 --------------------------- ---------------------------- 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: Oil proceeds $3,966,511 $1,149,530 $ 4,602,226 $1,347,379 Gas proceeds 2,558,968 345,283 3,277,505 500,433 ---------- --------- --------- --------- Total 6,525,479 1,494,813 7,879,731 1,847,812 ---------- --------- --------- --------- Less: Severance tax: Oil 161,681 37,416 191,734 50,070 Gas 190,947 8,708 (29,388) 25,837 Lease operating expense and property tax: Oil and gas 2,464,194 149,765 3,584,147 201,982 Capital expenditures 57,292 4,517,059 Other expense 16,000 --------- ------- --------- ------- Total 2,874,114 211,889 8,263,552 277,889 --------- ------- --------- ------- Net profits 3,651,365 1,282,924 (383,821) 1,569,923 Net overriding royalty interests 75% 95% 75% 95% --------- --------- -------- --------- 2,738,523 1,218,778 (287,866) 1,491,427 Less: excess cost over revenues(a) 396,012 --------- --------- --------- --------- Royalty income $2,738,523 $1,218,778 $ 108,146 $1,491,427 ========== ========== ========== ========= -13- (a) In calculating Trust royalty income for the month of June 1998, costs exceeded revenues by $396,012 for the Waddell Ranch properties underlying the Waddell Ranch Net Overriding Royalty Conveyance, dated November 1, 1980. Excess costs from one conveyance cannot reduce royalty income computed under another conveyance. Such excess costs were recovered from net proceeds of the underlying Waddell Ranch properties during the first quarter of 1999 and these properties are again contributing trust royalty income.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -14- PART II - OTHER INFORMATION Items 1 through 4. Not applicable. Item 5. Other Information The Trustee has received a copy of a Schedule 13D filed with the Securities and Exchange Commission on behalf of Alpine Capital L.P., a Texas limited partnership, Robert W. Bruce III, Algenpar, Inc., a Texas corporation, and J. Taylor Crandall. Such Schedule 13D reports Alpine Capital, L.P.'s ownership of 2,409,000 Units of Beneficial Interest of the Trust, which constitutes approximately 5.2% of the outstanding Units of Beneficial Interest of the Trust. The source of the funds for such acquisition, $11,729,410.84, was reported to be working capital of Alpine Capital, L.P. It is further reported that Alpine Capital, L.P. acquired 347,200 of such Units of Beneficial Interest between June 8, 1999 and August 6, 1999, in open market transactions on the New York Stock Exchange. It is further reported that Alpine Capital, L.P., acting through its two general partners identified below has the sole power to vote or to direct the vote and to dispose or to direct the disposition of such Units of Beneficial Interest of the Trust. It is reported that the Units of Beneficial Interest of the Trust were acquired and continue to be held for investment purposes. It is further reported that Robert W. Bruce, III and Algenpar, Inc. are the two general partners of Alpine Capital, L.P. and that J. Taylor Crandall is the President and sole stockholder of Algenpar, Inc. and because of such relationships may be deemed to be beneficial owners of the Units of Beneficial Interest acquired by Alpine Capital, L.P. As the general partners of Alpine Capital, L.P., it is reported that Robert W. Bruce, III and Algenpar, Inc. have shared power to vote or to direct the vote and to dispose or to direct the disposition of such Units of Beneficial Interest of the Trust. As the President and sole stockholder of Algenpar Inc., it is reported that J. Taylor Crandall has shared power to vote or to direct the vote and to dispose or to direct the disposition of such Units of Beneficial Interest of the Trust. 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 Bank of America, 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 Bank of America, 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 Bank of America, 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 -15- 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, 1999. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. BANK OF AMERICA, N.A., TRUSTEE FOR THE PERMIAN BASIN ROYALTY TRUST By: /s/ ERIC F. HYDEN ------------------------------------ Eric F. Hyden Vice President Date: August 13, 1999 (The Trust has no directors or executive officers.) -17- 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 Bank of America, 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 Bank of America, 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 Bank of America, 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, Bank of America, 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, 1999, AND THE RELATED CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME AND CHANGES IN TRUST CORPUS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999. 6-MOS DEC-31-1999 JUN-30-1999 $1,442,397 0 0 0 0 $1,442,397 $10,975,216 $7,891,611 $4,580,312 $1,424,397 0 0 0 0 $3,137,915 $4,580,312 0 $5,740,262 0 0 $260,340 0 0 $5,479,922 0 $5,479,922 0 0 0 $5,479,922 0 0
-----END PRIVACY-ENHANCED MESSAGE-----