-----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, AmmWpge04GmJl6/Qhcc4S1IMy34tVv9NAT4vNxDW7KxH3VW2ufOA/Mek62yuuk/K geHx10f0neG0QBeQpHz5zg== 0000950134-98-008751.txt : 19981113 0000950134-98-008751.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950134-98-008751 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: SEC FILE NUMBER: 001-08032 FILM NUMBER: 98744730 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 FOR QUARTER ENDED SEPTEMBER 30, 1998 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 September 30, 1998 Commission File No. 1-8032 SAN JUAN BASIN ROYALTY TRUST Texas I.R.S. No. 75-6279898 Bank One, Texas, N.A., Corporate 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 November 14, 1998: 46,608,796 Page 1 of 14 2 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 September 30, 1998, and the distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 1998 and 1997 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 September 30, 1998 and for the three-month and nine-month periods ended September 30, 1998 and 1997 included herein. -2- 3 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 September 30, 1998 and the related condensed statements of distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 1998 and 1997. 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 San Juan Basin Royalty Trust as of December 31, 1997, 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, 1998, 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, 1997 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 October 21, 1998 -3- 4 SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, ASSETS 1998 1997 (UNAUDITED) Cash and short-term investments $ 2,210,715 $ 5,111,832 Net overriding royalty interests in producing oil and gas properties (net of accumulated amortization of $81,032,927 and $77,156,080 at September 30, 1998 and December 31, 1997, respectively) 52,242,601 56,119,448 ----------- ----------- $54,453,316 $61,231,280 =========== =========== LIABILITIES AND TRUST CORPUS Distribution payable to Unit holders $ 2,210,715 $ 5,111,832 Trust corpus - 46,608,796 Units of beneficial interest authorized, issued and outstanding 52,242,601 56,119,448 ----------- ----------- $54,453,316 $61,231,280 =========== ===========
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1998 1997 1998 1997 Royalty income $ 6,276,679 $ 9,763,541 $24,618,472 $37,134,776 Interest income 12,749 21,669 57,951 76,214 ----------- ----------- ----------- ----------- 6,289,428 9,785,210 24,676,423 37,210,990 General and administrative expenditures 125,509 180,243 663,603 773,496 ----------- ----------- ----------- ----------- Distributable income $ 6,163,919 $ 9,604,967 $24,012,820 $36,437,494 =========== =========== =========== =========== Distributable income per Unit (46,608,796 Units) $ .132248 $ .206076 $ .515199 $ .781772 =========== =========== =========== ===========
The accompanying notes to condensed financial statements are an integral part of these statements. -4- 5 SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ------------------------------ 1998 1997 1998 1997 Trust corpus, beginning of period $ 53,419,624 $ 59,227,104 $ 56,119,448 $ 62,808,148 Amortization of net overriding royalty interest (1,177,023) (1,546,656) (3,876,847) (5,127,700) Distributable income 6,163,919 9,604,967 24,012,820 36,437,494 Distributions declared (6,163,919) (9,604,967) (24,012,820) (36,437,494) ------------ ------------ ------------ ------------ Trust corpus, end of period $ 52,242,601 $ 57,680,448 $ 52,242,601 $ 57,680,448 ============ ============ ============ ============
The accompanying notes to condensed financial statements are an integral part of these statements. -5- 6 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: o Royalty income recorded for a month is the amount computed and paid by the working interest owner, Burlington Resources Oil & Gas Company ("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%. o Trust expenses recorded are based on liabilities paid and cash reserves established from royalty income for liabilities and contingencies. o Distributions to Unit holders are recorded when declared by the Trustee. o 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 $1.05 per MMBtu for the year 1997 and is adjusted for inflation annually. The credit currently applies to production through the year 2002. Production from wells drilled after December 31, 1979, but prior to January 1, 1993, to a formation beneath a qualifying coal seam -6- 7 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 Trustee is provided Section 29 tax credit information related to Trust Properties by BROG. In 1997, the Tax Court upheld the IRS position that nonconventional fuel such as coal seam gas does not qualify for the Section 29 credit unless the producer received a formal certification from the Federal Energy Regulatory Commission ("FERC"). The FERC's certification authority expired effective January 1, 1993. Many producers believe that wells meeting the certification requirements are eligible for the Section 29 credit regardless of FERC certification. However, this position is not in accordance with the IRS position or the decision of the Tax Court. The court decision is on appeal and it is not possible to predict the likely outcome. In the event the appeal is not successful, the ability of the Unit holders to utilize allocated Section 29 credits in full could be in question. 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. 3. CONTINGENCIES See Item 1 Legal Proceedings concerning the status of litigation matters. ****** -7- 8 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. 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. However, the Trust is reliant on the performance of others, including the Trustee, BROG and third party vendors (collectively, the "suppliers") for such things as the calculation and receipt of Royalty income, payment of expenses and disbursement of distributable income. The Trust has made formal inquiries to the suppliers requesting information on their state of readiness for the Year 2000. The Trust is awaiting a response from BROG. Based upon responses received and reviewed by the Trust with respect to its other material suppliers, all are currently addressing the Year 2000 issue and making efforts to be compliant prior to the Year 2000. The Trust can provide no assurance as to whether the suppliers will successfully address the Year 2000 issue. Failure to successfully address the Year 2000 issue by the suppliers could have a material adverse impact on the Trust and its Unit holders. At this time, the Trust believes the most adverse impact as a result of the suppliers' failure to successfully address the Year 2000 issue is that the Trust would not receive and in turn would not be able to distribute royalty income to the Unit holders. THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 The San Juan Basin Royalty Trust received royalty income of $6,276,679 and interest income of $12,749 during the third quarter of 1998. After deducting administrative expenses of $125,509, distributable income for the third quarter was $6,163,919 ($.132248 per Unit). In the third quarter of 1997, royalty income was $9,763,541, interest income was $21,669, administrative expenses were $180,243 and distributable income was $9,604,967 ($.206076 per Unit). The tax credit relating to production from coal seam wells totaled approximately $.04 per Unit for the third quarter of 1998 and $.05 per Unit for the third quarter of 1997. For further information concerning this tax credit, Unit holders should refer to the Trust's Annual Report for 1997. Based on 46,608,796 Units outstanding, the per Unit distributions during the third quarter of 1998 were as follows: July $ .046990 August .037827 September .047431 ------- Quarter Total $ .132248 =========
-8- 9 The royalty income distributed in the third quarter of 1998 was lower than that distributed in the third quarter of 1997, primarily due to a decrease in the average gas price from $1.76 per Mcf for the third quarter of 1997 to $1.62 per Mcf for the third quarter of 1998 and to an increase in capital costs during the third quarter of 1998. Interest earnings for the quarter ended September 30, 1998, as compared to the quarter ended September 30, 1997, were lower, primarily due to decreased funds available for investment. Administrative expenses decreased, primarily as a result of differences in timing of the receipt and payment of these expenses and lower consulting and audit expenses. The capital costs attributable to the properties from which the Royalty was carved (the "Underlying Properties") for the third quarter of 1998 were reported by BROG as $3,745,082 versus $1,537,795 for the third quarter of 1997. BROG indicates that the majority of the increase in capital expenditures is attributable to conventional projects, but that based on its success in 1997, significant capital will be allocated to increasing the density and productivity of its operations in the Fruitland Coal. BROG has informed the Trustee that its estimated capital budget for 1998 has been increased from $10 million to $10.9 million. Lease operating expenses and property taxes were $2,786,500 for the third quarter of 1998 as compared to $2,649,405 for the third quarter of 1997. BROG has informed the Trustee that during the third quarter of 1998, 1 gross (.04 net) conventional well was completed on the Underlying Properties. There were 36 gross (7.70 net) conventional wells in progress at September 30, 1998. Two gross (1.47 net) conventional wells were recompleted and 5 gross (.21 net) coal seam well recavitations were completed on the Underlying Properties in the third quarter of 1998. Two gross (.07 net) conventional well recompletions, 1 gross (.045 net) coal seam recompletions and 5 gross (.16 net) coal seam recavitations were in progress at September 30, 1998. By comparison, twelve gross (.60 net) conventional wells were completed on the Underlying Properties in the third quarter of 1997. There were 1 gross (.04 net) coal seam and 29 gross (2.4 net) conventional wells in progress at September 30, 1997. Three gross (1.76 net) conventional wells were recompleted through September 30, 1997. Five gross (1.15 net) conventional well recompletions and twelve gross (.46 net) coal seam recompletions were in progress as of September 30, 1997. Six gross (1.01 net) coal seam well recavitations were completed and nine gross (.71) net coal seam well recavitations were in progress as of September 30, 1997. Unit holders are referred to "Description of the Properties" in the Trust's Annual Report for 1997 for further information concerning BROG's coal seam gas 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 September 30, 1998 is associated with actual gas and oil production during May 1998 through July 1998 from the Underlying Properties. Gas and oil sales from the Underlying Properties for the quarters ended September 30, 1998 and 1997 were as follows:
1998 1997 Gas: Total sales (Mcf) 10,135,621 10,679,663 Mcf per day 110,170 116,083 Average price (per Mcf) $ 1.62 $ 1.76 Oil: Total sales (Bbls) 18,478 21,568 Bbls per day 201 234 Average price (per Bbl) $ 12.03 $ 17.67
-9- 10 Gas and oil sales attributable to the Royalty for the quarters ended September 30, 1998 and 1997 were as follows:
1998 1997 Gas sales (Mcf) 4,264,729 6,057,651 Oil sales (Bbls) 7,771 12,247
During the third quarter of 1998, gas prices were lower than during the third quarter of 1997. Gas production also decreased in 1998 as compared to 1997. The price per barrel of oil during the third quarter of 1998 was $5.64 per bbl lower than that received for the third quarter of 1997 due to decreases in oil prices in world markets generally including the posted prices applicable to oil sales attributable to the Royalty. Since the oil and gas 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 aggregate production volumes from the Underlying Properties may not provide a meaningful comparison to volumes attributable to the Royalty. Effective January 1, 1998, all volumes of Trust gas became subject to the terms of a Natural Gas Sales and Purchase Contract between BROG and El Paso Energy Marketing Company ("El Paso"). That contract is for a term of two years through and including December 31, 1999, and provides for the sale of Trust gas at prices which will fluctuate in accordance with published indices for gas sold in the San Juan Basin of New Mexico. BROG entered into the contract with El Paso after soliciting and receiving competitive bids in late 1997 from six major gas marketing firms to market and/or purchase the Trust gas. Unit holders are referred to Note 6 of the Notes to Financial Statements in the Trust's 1997 Annual Report for further information concerning the marketing of gas produced from the Underlying Properties. NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 For the nine months ended September 30, 1998, distributable income was $24,012,820 ($.515199 per Unit), which was less than the $36,437,494 ($.781772 per Unit) of income distributed during the same period in 1997. The decrease resulted primarily from decreases in gas and oil prices. Interest income for the nine months ended September 30, 1998 was $57,951 compared to $76,214 during the first nine months of 1997. This decrease is due to a decrease in funds available for investment. General and administrative expenses decreased to $663,603 from $773,496 during the 1997 period primarily due to differences in timing of the receipt and payment of these expenses. Capital expenditures incurred by BROG, attributable to the Underlying Properties, for the first nine months of 1998 amounted to $10,048,168. Capital expenditures were $5,651,763 for the first nine months of 1997. Lease operating expenses and property taxes totaled $8,590,061 for the first nine months of 1998 compared to $8,303,522 for the first nine months of 1997. -10- 11 BROG informed the Trustee that during the nine months ended September 30, 1998, 10 gross (5.13 net) conventional wells were completed on the Underlying Properties and 21 gross (10.74 net) conventional wells were recompleted. Twenty-nine gross (2.01 net) coal seam wells were recavitated during the first nine months of 1998. During the nine months ended September 30, 1997, 41 gross (2.66 net) conventional wells were completed on the Underlying Properties. One gross (.84 net) coal seam and four gross (2.59 net) conventional wells were recompleted during the first nine months of 1997. Ten gross (1.56 net) coal seam wells were recavitated during the first nine months of 1997. Royalty income for the nine months ended September 30, 1998 is associated with actual gas and oil production during November 1997 through July 1998 from the Underlying Properties. Gas and oil sales from the Underlying Properties for the nine months ended September 30, 1998 and 1997 were as follows:
1998 1997 Gas: Total sales (Mcf) 31,263,993 31,506,749 Mcf per day 114,520 115,409 Average price (per Mcf) $ 1.81 $ 2.19 Oil: Total sales (Bbls) 63,694 70,054 Bbls per day 233 257 Average price (per Bbl) $ 13.80 $ 19.70
Gas and oil sales attributable to the Royalty for the nine months ended September 30, 1998 and 1997 were as follows:
1998 1997 Gas sales (Mcf) 14,721,489 18,122,585 Oil sales (Bbls) 29,706 39,460
During the first nine months of 1998, gas and oil prices were lower than during the first nine months of 1997. Since the oil and gas 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 aggregate sales amounts from the Underlying Properties may not provide a meaningful comparison to sales attributable to the Royalty. -11- 12 CALCULATION OF ROYALTY INCOME: Royalty income received by the Trust for the three months and nine months ended September 30, 1998 and 1997, respectively, was computed as shown in the following table:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------------------- 1998 1997 1998 1997 Gross proceeds of sales from the Underlying Properties: Gas proceeds $16,436,207 $18,758,331 $56,513,251 $69,003,247 Oil proceeds 222,230 381,186 879,060 1,380,372 ----------- ----------- ----------- ----------- Total 16,658,437 19,139,517 57,392,311 70,383,619 ----------- ----------- ----------- ----------- Less production costs: Severance tax - Gas 1,735,847 1,896,788 5,832,736 6,782,548 Severance tax - Oil 22,103 37,474 96,716 132,751 Lease operating expenses and property tax 2,786,500 2,649,405 8,590,061 8,303,522 Capital expenditures 3,745,082 1,537,795 10,048,169 5,651,763 ----------- ----------- ----------- ----------- Total 8,289,532 6,121,462 24,567,682 20,870,584 ----------- ----------- ----------- ----------- Net profits 8,368,905 13,018,055 32,824,629 49,513,035 ----------- ----------- ----------- ----------- Net overriding royalty interest 75% 75% 75% 75% ----------- ----------- ----------- ----------- Royalty income $ 6,276,679 $ 9,763,541 $24,618,472 $37,134,776 =========== =========== =========== ===========
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -12- 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Trust is not a party to any litigation. However, the Trust is aware that BROG is involved in litigation from time to time that could affect the royalty income received by the Trust. A lawsuit has been commenced against BROG by certain royalty and overriding royalty owners on behalf of those persons similarly situated. The suit involves properties that are burdened by the Trust's royalty interest. This case is one of six virtually identical class actions filed against New Mexico gas producers. All such cases have been consolidated in the First Judicial District of Santa Fe County, New Mexico in a case filed September 1, 1995 and styled San Juan 1990-A, L.P., et al. v. El Paso Production Company and Meridian Oil Inc. The plaintiffs allege that they and members of the proposed class have been underpaid for royalties and overriding royalties. The plaintiffs have sought to certify the actions as class actions and seek monetary damages. The court has denied class certification. Because of the pending nature of the litigation, exposure to the Trust from this suit cannot be quantified. However, if the plaintiffs who have interests in properties that are burdened by the Trust are successful, royalty income received by the Trust could decrease. In addition, the Trust is aware of an administrative claim initiated by the Mineral Management Service of the United States Department of the Interior (the "MMS") against BROG by demand letter dated March 17, 1997 regarding a gas contract settlement dated March 1, 1990, between BROG and certain other parties thereto. The claim alleges that additional royalties are due on production from federal and Indian leases in the State of New Mexico on properties that are burdened by the Royalty. BROG filed its statement of reasons in June 1997 thereby contesting whether the royalties are payable as claimed. If the MMS claim is successful, royalty income received by the Trust could decrease. 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 (now Burlington Resources Oil & Gas 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 (now Burlington Resources Oil & Gas 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) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1998. -13- 14 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 Date: November 14, 1998 (The Trust has no directors or executive officers.) -14- 15 INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT (4)(a) San Juan Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company (now Burlington Resources Oil & Gas 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 (now Burlington Resources Oil & Gas 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. 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 SEPTEMBER 30, 1998, AND THE RELATED CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME AND CHANGES IN TRUST CORPUS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998. 9-MOS DEC-31-1998 SEP-30-1998 2,210,715 0 0 0 0 2,210,715 133,275,528 81,032,927 54,453,316 2,210,715 0 0 0 0 52,242,601 54,453,316 0 24,676,423 0 0 663,603 0 0 24,012,820 0 24,012,820 0 0 0 24,012,820 0 0
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