-----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, KDGXYi2m5jx9uKW0JNxrSPFUkx0brxOLye1bBYfXnOV36OSc2Wx2cihzJvySou4e SlkK5bQ6iL8M2kJC4LZvPg== 0000930661-97-001331.txt : 19970520 0000930661-97-001331.hdr.sgml : 19970520 ACCESSION NUMBER: 0000930661-97-001331 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAN JUAN BASIN ROYALTY TRUST CENTRAL INDEX KEY: 0000319655 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 756279898 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08032 FILM NUMBER: 97607016 BUSINESS ADDRESS: STREET 1: BANK ONE TEXAS N A TRUST CITY: FT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8178844630 MAIL ADDRESS: STREET 1: 1600 BANK ONE TOWER STREET 2: 500 THROCKMORTON CITY: FORT WORTH STATE: TX ZIP: 76102-3899 10-Q 1 FORM 10-Q 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 March 31, 1997 Commission File No. 1-8032 SAN JUAN BASIN ROYALTY TRUST Texas I.R.S. No. 75-6279898 Bank One, Texas, N.A., Trust Department P. O. Box 2604 Fort Worth, Texas 76113 Telephone Number 817/884-4630 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 outstanding at May 15, 1997: 46,608,796 ---------- Page 1 of 12 SAN JUAN BASIN ROYALTY TRUST PART I - FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements included herein have been prepared by Bank One, Texas, N.A. as Trustee for the San Juan 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 San Juan Basin Royalty Trust at March 31, 1997, and the distributable income and changes in trust corpus for the three- month periods ended March 31, 1997 and 1996 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 review of the condensed financial statements as of March 31, 1997 and for the three-month periods ended March 31, 1997 and 1996 included herein. -2- INDEPENDENT ACCOUNTANTS' REPORT Bank One, Texas, N.A. as Trustee for the San Juan Basin Royalty Trust: We have reviewed the accompanying condensed statement of assets, liabilities and trust corpus of the San Juan Basin Royalty Trust as of March 31, 1997 and the related condensed statements of distributable income and changes in trust corpus for the three-month periods ended March 31, 1997 and 1996. These financial statements are the responsibility of the Trustee. We conducted our review 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 review, 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 San Juan Basin Royalty Trust as of December 31, 1996, 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 25, 1997, 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, 1996 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 May 9, 1997
SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS - --------------------------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, ASSETS 1997 1996 (UNAUDITED) Cash and short-term investments $ 7,129,116 $ 3,127,828 Net overriding royalty interests in producing oil and gas properties (net of accumulated amortization of $72,638,317 and $70,467,380 at March 31, 1997 and December 31, 1996, respectively) 60,637,211 62,808,148 ----------- ----------- $67,766,327 $65,935,976 =========== =========== LIABILITIES AND TRUST CORPUS Distribution payable to Unit holders (Note 3) $ 7,129,116 $ 3,127,828 Commitments and contingencies (Note 3) Trust corpus - 46,608,796 Units of beneficial interest authorized and outstanding 60,637,211 62,808,148 ----------- ----------- $67,766,327 $65,935,976 =========== ===========
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) - ----------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, --------------------------------- 1997 1996 Royalty income $18,471,262 $4,707,617 Interest income 27,657 6,507 ----------- --------- 18,498,919 4,714,124 General and administrative expenditures 231,502 787,774 Distributable income $18,267,417 $3,926,350 =========== ========== Distributable income per Unit (46,608,796 Units) $ .391930 $ .084239 =========== ========== The accompanying notes to condensed financial statements are an integral part of these statements.
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SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) - ------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, --------------------------------- 1997 1996 Trust corpus, beginning of period $62,808,148 $70,133,536 Amortization of net overriding royalty interest (2,170,937) (1,642,157) Distributable income 18,267,417 3,926,350 Distributions declared (18,267,417) (3,926,350) ----------- ----------- Trust corpus, end of period $60,637,211 $68,491,379 =========== ===========
The accompanying notes to condensed financial statements are an integral part of this statement. -5- SAN JUAN BASIN ROYALTY TRUST NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 1. BASIS OF ACCOUNTING The San Juan 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 working interest owner, Burlington Resources Oil & Gas ("BROG"), to the Trustee for the Trust. Royalty income consists of the amounts received by the owner of the interest burdened by the net overriding royalty interest ("Royalty") 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%. . Trust expenses recorded are based on liabilities paid and cash reserves established from royalty income 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; certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP; and amortization of the Royalty 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 rather than when distributed by the Trust. The Royalty constitutes an "economic interest" 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 Royalty is treated as a single property for depletion purposes. The Trust has on file technical advice memoranda confirming the tax treatment described above. The Trust began receiving royalty income from coal seam wells beginning in 1989. Under Section 29 of the Internal Revenue Code, production from coal seam gas wells drilled prior to January 1, 1993, qualifies for the federal income tax credit for producing non-conventional fuels. This tax credit was approximately $1.03 per MMBtu for the year 1996 and is adjusted for inflation annually. The credit currently applies to production through the year 2002. Production from wells drilled after -6- December 31, 1979, but prior to January 1, 1993, to a formation beneath a qualifying coal seam formation which are later completed into such formation also qualifies for the tax credit. Each Unit holder must determine his pro rata share of such production based upon the number of Units owned during each month of the year and apply the tax credit against his own income tax liability, but such credit may not reduce his regular tax liability (after the foreign tax credit and certain other nonrefundable credits) below his tentative minimum tax. Section 29 also provides that any amount of Section 29 credit disallowed for the tax year solely because of this limitation will increase his credit for prior year minimum tax liability, which may be carried forward indefinitely as a credit against the taxpayer's regular tax liability, subject, however, to the limitations described in the preceding sentence. There is no provision for the carryback or carryforward of the Section 29 credit in any other circumstances. 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 reduce passive losses. ****** -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. 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. THREE MONTHS ENDED MARCH 31, 1997 AND 1996 During the first quarter of 1997, the San Juan Basin Royalty Trust received royalty income of $18,471,262. Distributable income consists of royalty income plus interest income less administrative expenses. Interest income for the quarter was $27,657 and administrative expenses were $231,502. Thus, distributable income totaled $18,267,417. Based on 46,608,796 Units outstanding, the per Unit distributions during the first quarter of 1997 were as follows: January $.101024 February .137950 March .152956 -------- Quarter Total $.391930 ======== The amount distributed to Unit holders in the first quarter of 1997 was more than the $.084239 distributed in the first quarter of 1996. The increase was primarily attributable to an increase in the average gas price from $1.17 per Mcf for the first quarter of 1996 to $3.05 per Mcf for the first quarter of 1997 and lower administrative expenses in 1997. The tax credit relating to production from coal seam wells totaled approximately $.06 per Unit for the first quarter of 1997 compared to $.04 per Unit for the first quarter of 1996. Interest income for the first quarter of 1997 was more than the $6,507 in the first quarter of 1996 due to increased funds available for investment and higher interest rates. Administrative expenses of $231,502 were lower in the first three months of 1997 as compared to $787,774 in the first quarter of 1996, primarily as a result of a decrease in the Trust's legal and other expenses relating to the settlement of litigation involving the Trust and Burlington Resources Oil & Gas Company ("BROG"). Unit holders are referred to "Trustee's Discussion and Analysis" in the Trust's Annual Report for 1996 for additional information regarding the settlement. Capital expenditures incurred by BROG, attributable to the properties from which the Royalty was carved, for the first quarter of 1997 amounted to $2,320,206. Capital expenditures were $1,374,090 for the first quarter of 1996. The increase in capital expenditures in 1997 is primarily due to increased drilling activity. In the first quarter of 1997, 13 gross (.51 net) conventional wells were completed on the properties from which the Royalty was carved. One gross (.84 net) coal seam well was recompleted and 4 gross (.55 net) coal seam wells were recavitated through March 31, 1997. There was one gross (.83 net) conventional well recompleted through March 31, 1997. There were 13 gross (2.15 net) conventional wells, 1 gross (.87 net) conventional well recompletion, 1 gross (.04 net) coal seam well and 4 gross (.16 net) recompletions to -8- Fruitland Coal from other formations in progress on March 31, 1997. In the first quarter of 1996, 1 gross (.5 net) coal seam well was completed on the properties from which the Royalty was carved. There were 3 gross (.81) coal seam wells in progress on March 31, 1996. Two gross (1.59 net) coal seam wells were recavitated, and 4 gross (.17 net) coal seam well recavitations were in progress through March 31, 1996. There were 7 gross (1.14 net) conventional wells completed and 7 gross (1.15 net) conventional wells in progress at March 31, 1996. Six gross (3.88 net) conventional wells were recompleted, and 2 gross (.75 net) conventional recompletions were in progress through March 31, 1996. Unit holders are referred to "Description of the Properties" in the Trust's Annual Report for 1996 for further information concerning BROG's coal seam well drilling program in the San Juan Basin. This program includes properties in which the Trust owns an interest. Royalty income for the quarter ended March 31, 1997 is associated with actual gas and oil production during November 1996 through January 1997 from the properties from which the Royalty was carved. Gas and oil sales for the quarters ended March 31, 1997 and 1996 were as follows:
1997 1996 PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED: Gas: Total sales (Mcf) 10,613,520 9,661,249 Mcf per day 115,364 105,014 Average price (per Mcf) $ 3.05 $ 1.17 Oil: Total sales (Bbls) 20,962 20,079 Bbls per day 228 218 Average price (per Bbl) $ 22.64 $ 18.10 ROYALTIES: Gas sales (Mcf) 6,542,089 4,439,622 Oil sales (Bbls) 12,663 9,116
Coal seam gas production increased from 3,984,792 Mcf in the first quarter of 1996 to 5,020,207 Mcf in the first quarter of 1997. The price paid for gas production increased during the first quarter of 1997. Gas volumes increased in the first quarter of 1997 primarily due to the increased volumes from coal seam wells. The price received per barrel of oil in the first quarter of 1997 was higher than that received in the first quarter of 1996. Lease operating expenses and property taxes totaled approximately $2,887,013 during the first quarter of 1997 compared to approximately $2,659,548 for the first quarter of 1996. Since the gas and oil sales attributable to the Royalty are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production volumes from properties from which the Royalty was carved do not provide a meaningful comparison to volumes attributable to the Royalty. -9- CALCULATION OF ROYALTY INCOME Royalty income received by the Trust for the three months ended March 31, 1997 and 1996 was computed as shown in the following table:
1997 1996 Gross proceeds of sales from the properties from which the net overriding royalty was carved: Gas proceeds $32,404,871 $11,264,797 Oil proceeds 474,537 363,515 ----------- ----------- Total 32,879,408 11,628,312 ----------- ----------- Less production costs: Severance tax - Gas 2,994,864 1,274,815 Severance tax - Oil 48,975 43,035 Lease operating expense and property tax 2,887,013 2,659,548 Capital expenditures 2,320,206 1,374,091 ----------- ----------- Total 8,251,058 5,351,489 ----------- ----------- Net profits 24,628,350 6,276,823 Net overriding royalty interest 75 % 75 % ----------- ----------- Royalty income $18,471,262 $ 4,707,617 =========== ===========
-10- PART II - OTHER INFORMATION Item 1. Legal Proceedings Items 2-5 Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4)(a) San Juan Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company and The Fort Worth National Bank (now Bank One, 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 from Southland Royalty Company to The Fort Worth National bank (now Bank One, 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. (27) Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. -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. BANK ONE, TEXAS, N.A. AS TRUSTEE FOR THE SAN JUAN BASIN ROYALTY TRUST By /s/ LEE ANN ANDERSON ----------------------------------- Lee Ann Anderson Vice President Dated as of May 15, 1997 (The Trust has no directors or executive officers.) -12- INDEX TO EXHIBITS SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE (4)(a) San Juan Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company and The Fort Worth National Bank (now Bank One, 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 from Southland Royalty Company to The Fort Worth National bank (now Bank One, 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.* (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 One, Texas, N.A., P.O. Box 2604, Fort Worth, Texas 76113. ** Filed herewith. -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS OF SAN JUAN BASIN ROYALTY TRUST AS OF MARCH 31, 1997, AND THE RELATED CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME AND CHANGES IN TRUST CORPUS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997. 3-MOS DEC-31-1997 MAR-31-1997 7,129,116 0 0 0 0 7,129,116 133,275,528 72,638,317 67,766,327 7,129,116 0 0 0 0 60,637,211 67,766,327 0 18,498,919 0 0 231,502 0 0 18,267,417 0 18,267,417 0 0 0 18,267,417 0 0
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