-----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, LZzQJWnq29AEiq86DvmmfGAgxPG1aRwPzuWSRbsKeBv3tqRDmWN4WRjsGLmAtrIf kl2LPDmTloQf3+iKaXQvhA== 0000072633-02-000002.txt : 20020413 0000072633-02-000002.hdr.sgml : 20020413 ACCESSION NUMBER: 0000072633-02-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20020114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH EUROPEAN OIL ROYALTY TRUST CENTRAL INDEX KEY: 0000072633 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 222084119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08245 FILM NUMBER: 2508563 BUSINESS ADDRESS: STREET 1: P O BOX 456 STREET 2: 43 WEST FRONT STREET SUITE 19-A CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 9087414008 MAIL ADDRESS: STREET 1: P O BOX 456 STREET 2: 43 WEST FRONT STREET SUITE 19-A CITY: RED BANK STATE: NJ ZIP: 07701 10-K 1 tenk01.txt 2001 10-K NORTH EUROPEAN OIL ROYALTY TRUST SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended October 31, 2000 or ---------------- [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . ---------------- ---------------- Commission file number 1-8245 ------ NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-2084119 - ----------------------- ------------------------------------ (State of organization) (IRS Employer Identification Number) Suite 19A, 43 West Front Street, Red Bank, N.J. 07701 ---------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: 732-741-4008 --------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ---------------------------- ----------------------------------------- Units of Beneficial Interest New York Stock Exchange Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] - 2 - As of December 31, 2001, 8,931,414 units of beneficial interest of the Registrant were outstanding, and the aggregate market value of outstanding units of beneficial interest of the Registrant, which may be voted, held by non-affiliates of the Registrant was approximately $174,007,453 on such date. (The Trustees and the Managing Director are the only persons deemed to be affiliates of the Registrant.) Documents Incorporated by Reference ----------------------------------- Items 10, 11, 12 and 13 of Part III have been partially or wholly omitted from this report and the information required to be contained therein is incorporated by reference from the Registrant's definitive proxy statement, dated January 10, 2002, for the annual meeting to be held on February 13, 2002. - 3 - PART I Item 1. Business. --------- (a) General Development of Business. -------------------------------- Registrant (the "Trust") is a trust which, on behalf of the owners of beneficial interest in the Trust (the "unit owners"), holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany. The rights are held under contracts with local German exploration and development subsidiaries of Exxon Mobil Corp. and the Royal Dutch Group. Under these contracts, the Trust receives various percentage royalties on the proceeds of the sales of certain products from the areas involved. At the present time, royalties are received for sales of gas well gas, oil well gas, crude oil, distillate and sulfur. See Item 2 for descriptions of certain of these contracts. The royalty rights were received by the Trust from North European Oil Company (the "Company") upon dissolution of the Company in September, 1975. The Company was organized in 1957 as the successor to North European Oil Corporation (the "Corporation"). The Trust is administered by trustees (the "Trustees") under an Agreement of Trust dated September 10, 1975, amended May 13, 1976 and February 10, 1981 and as deemed amended pursuant to the Delaware Court of Chancery order dated February 26, 1996 (the "Trust Agreement"). Neither the Trust nor the Trustees on behalf of the Trust conduct any active business activities or operations. The sole permitted function of the Trustees is to monitor, verify, collect, hold, invest, and distribute the royalty payments made to the Trust. Under the Trust Agreement, the Trustees make quarterly distributions of the net funds received by the Trust on behalf of the unit owners. Funds temporarily held by the Trust are invested in interest bearing bank deposits, certificates of deposit, U.S. Treasury Bills or other government obligations. There has been no significant change in the principal operation or purpose of the Trust during the past fiscal year. (b) Financial Information about Industry Segments. ---------------------------------------------- The Trust conducts no active business operations, and analysis by industry segments is accordingly not applicable to the Trust. To the extent that royalty income received by the Trust is attributable to sales of different products, to sales from different geographic areas or to sales by different operating companies the information is set forth in Item 2 of this Report and the Exhibit described in that Item 2. - 4 - (c) Narrative Description of Business. ---------------------------------- Under the Trust Agreement, the Trust conducts no active business operations and is restricted to collection of income from royalty rights and distribution to unit owners of the net income after payment of administrative and related expenses. The overriding royalty rights held by the Trust are derived from contracts and agreements originally entered into by German subsidiaries of the predecessor Corporation during the early 1930's. Some of these royalty rights are based on leases which have passed their original expiration dates. However, the leases remain in effect as long as there is continued production or the lessor does not cancel the lease. Individual lessors will normally not seek termination of the rights originally granted because the leases provide for royalty payments to the lessors if sales of oil or gas result from discoveries made on the leased land. Additionally, termination by individual lessors would result in the escheat of mineral rights to the State. The remainder of the Trust's royalty rights are based on government granted concessions which remain in effect as long as there are continued production activities and/or exploration efforts by the operating companies. It is generally anticipated that the operating companies will continue production where it remains economically profitable for them to do so. Royalties are paid to the Trust on sales from production under these leases and concessions by the operating companies on a regular monthly or quarterly basis pursuant to the royalty agreements. Beginning in January 2001, the operating companies began to making royalty payments to the Trust exclusively in Euros. Once deposited in the Trust's account with Deutsche Bank in Germany, the Euros were converted into U.S. dollars at the rate in effect on the date of transfer. The Trust does not engage in hedge or similar transactions and the fluctuations in the conversion rate impact its financial results. The Trust did not experience any difficulty in effecting the conversion into U.S. dollars. As the holder of overriding royalty rights, the Trust has no legal ability, whether by contract or operation of law, to compel production. Moreover, if an operator should determine to terminate production in any concession or lease area and to surrender the concession or lease, the royalty rights for that area would thereby be terminated. Under certain royalty agreements, the operators are required to advise the Trust of any intention to surrender lease or concession rights. In recent years, no such notices have been received and management of the Trust has not been informed of any such intention. The Trust itself is precluded from undertaking any production activities and only if it could locate an alternate operator for the same areas would there be any possibility of continued royalty payments for such an area following any such termination. The likelihood of locating such an alternate operator is small because the current operating companies would be unlikely to surrender their rights for areas where continued economic return from production is reasonably anticipated. The exploration for and the production of gas and oil is a speculative business. The Trust has no means of ensuring continued income from its royalty rights at either their present levels or otherwise. In - 5 - addition, fluctuations in prices and supplies of gas and oil and what effect these fluctuations might have on royalty income to the Trust and on reserves net to the Trust cannot be accurately projected. The Trustees have no information with which to make any projections beyond information on economic conditions which is generally available to the public and thus are unwilling to make any such projections. While Germany has laws relating to environmental protection, the Trustees have no detailed information concerning the present or possible effect of such laws on operations in areas where the Trust holds royalty rights on production and sale of product from those areas. Seasonal demand factors affect the income from royalty rights insofar as they relate to energy demands and increases or decreases in prices, but, on the average they are not material to the regular annual income received under the royalty rights. The Trust, either itself or in cooperation with holders of parallel royalty rights, arranges for periodic audits of the books and records of the operating companies to verify compliance with the computation provisions of the applicable agreements. From time to time, these examinations disclose computational errors or errors from inappropriate application of existing agreements and appropriate adjustments are requested and made. (d) Financial Information about Foreign and Domestic Operations and --------------------------------------------------------------- Export Sales. - ------------- The Trust does not engage in any active business operations, and its sources of income are the overriding royalty rights covering gas, sulfur and oil production in certain areas in Germany and interest on the funds temporarily invested by the Trustees. In Item 2 there is a schedule (by product, geographic area and operating company) showing the royalty income received by the Trust during the fiscal year ended October 31, 2001. (e) Executive Officers of the Trust. -------------------------------- The affairs of the Trust are managed by not more than five individual Trustees who receive compensation determined under the Trust Agreement. One of the Trustees is designated as Managing Trustee and receives additional compensation in such capacity. The Managing Trustee, John H. Van Kirk, is responsible for managerial oversight, while day to day matters are handled by the Managing Director, John R. Van Kirk. John H. Van Kirk, who is 77 years old, has been Managing Trustee since the Trust's inception in 1975. John R. Van Kirk, who is 49 years old, has held the position of Managing Director of the Trust since November 1990. John R. Van Kirk is the son of John H. Van Kirk, the Managing Trustee. The Managing Director provides office space and services at cost to the Trust. In addition to the Managing Trustee and the Managing Director, the Trust has one secretarial employee in the United States. It - 6 - also retains a part-time consultant in Germany on a fixed yearly basis plus associated expenses. Employee relations or labor contracts are not directly material to the business or income of the Trust. The Trustees have no specific information concerning employee relations of the operating companies. Item 2. Properties. ----------- The properties of the Trust, which the Trust and Trustees hold pursuant to the Trust Agreement on behalf of the unit owners, are overriding royalty rights on sales of gas, sulfur and oil under certain concessions or leases in the Federal Republic of Germany. The actual leases or concessions are held either by Mobil Erdgas-Erdol GmbH ("Mobil Erdgas"), a German operating subsidiary of the Exxon Mobil Corp., or by Oldenburgische Erdol Gesellschaft ("OEG"). The Oldenburg concession (1,398,000 acres), covering virtually the entire former State of Oldenburg and located in the Federal state of Lower Saxony, is the major source of royalty income for the Trust. Within this concession Mobil Erdgas and BEB Erdgas und Erdol GmbH ("BEB"), a joint venture of Exxon Mobil Corp. and the Royal Dutch Group, carry out all exploration, drilling, production and sales activities. As a result by direct and indirect ownership, Exxon Mobil Corp. owns two-thirds of OEG and the Royal Dutch Group owns one-third of OEG. Under one series of rights covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas ell gas, oil well gas, crude oil and condensate. Under the royalty agreement with Mobil Erdgas there is no deduction of costs prior to the calculation of royalties from gas well gas or oil well gas, which together account for approximately 99% of all the royalties under said agreement. The Trust also is entitled to receive from Mobil Erdgas a 2% royalty on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg. The payment of the sulfur royalty is conditioned upon sales by Mobil Erdgas of sulfur at a selling price above an agreed upon base price. This base price is adjusted annually by an inflation index. When the average selling price falls below the adjusted base price, no royalties are payable. No payments were received under this sulfur royalty during fiscal 2001. Under another series of rights covering the entire Oldenburg concession and pursuant to an agreement with OEG (the "OEG Agreement"), the Trust receives royalties at the rate of 0.6667% on gross receipts from sales of gas well gas, oil well gas, crude oil, condensate and sulfur (removed during the processing of sour gas) less 50% of an escalating cost base. This cost base is recomputed annually based on indices reflecting changes in certain prices within Germany. Under the agreement previously reached with OEG, the computation system will be changed in 2002, at which time 50% of the field handling, treatment and transportation costs as reported for state royalty purposes will be deducted from the gross sales receipts prior to the calculation of the royalty to be paid to the Trust. Based on the limited audit access available to it and the financial information provided by the operating companies, the Trust's management does not believe that this change - 7 - will materially alter the amount of the Trust's royalty receipts, but there can be no assurance that this will be the case until the calculations are actually applied. The Trust also holds through Mobil Erdgas a 2% royalty interest in oil and gas sales from acreage in Bavaria, and a 0.2117% royalty under the net interest of the Bayerische Mineral Industries A.G. ("BMI"), a subsidiary of Mobil Erdgas, in concessions in Bavaria. The net interest of BMI ranges from 16-1/2 to 100% of the sales, depending on the geographic region or area. Due to the absence of royalty income under this agreement, reserves from this area in Bavaria are not included in reserve calculations for this report year. While both Mobil Erdgas and BMI have suspended production in their concessions in Bavaria, the concessions remain open. In addition to the areas of Oldenburg and Bavaria, the Trust also holds overriding royalties on 21 leases in other areas of northwest Germany ranging in size from 185 to 25,000 acres and totaling 73,214 acres. The ates of overriding royalties vary from 1.83% to 6.75%. At the present time all but one of these 21 leases are in the non-producing category. Due to the low level of income and the intermittent gas production from the single producing lease, reserves from this lease are not included in reserve calculations for this report year. The following is a schedule of royalty income for the fiscal year ended October 31, 2001 by product, geographic area and operating company: BY PRODUCT: ----------- Product Royalty Income - ------- -------------- Gas Well and Oil Well Gas $ 22,156,746 Sulfur $ 125,646 Oil $ 171,038 BY GEOGRAPHIC AREA: ------------------- Area Royalty Income - ---- -------------- Western Oldenburg $ 19,249,489 Eastern Oldenburg $ 3,145,824 Non-Oldenburg Areas $ 58,117 - 8 - BY OPERATING COMPANY: --------------------- Company Royalty Income - ------- -------------- Mobil Erdgas-Erdol GmbH $ 16,697,772 OEG $ 5,755,658 Exhibit 99.1 to this Report is a report dated December 21, 2001 which summarizes certain production data and the estimated net proved producing reserves as of October 1, 2001, based on the limited information available, for the Oldenburg area in which the Trust now holds overriding royalty rights. That report, the Estimate of Remaining Proved Producing Reserves in the Northwest Basin of the Federal Republic of Germany as of October 1, 2001 and Calculation of Cost Depletion Percentage for the 2001 Calendar Year, (the "Reserve and Depletion Report") was prepared by Ralph E. Davis Associates, Inc., 3555 Timmons Lane, Suite 1105, Houston, Texas 77027 ("Davis Associates"). Davis Associates is an independent petroleum and natural gas consulting organization specialized in analyzing hydrocarbon reserves. In order to permit timely filing of this Report and consistent with the practice of the Trust in prior years, the information has been prepared for the 12-month period ending September 30, 2001, which is one month prior to the end of the fiscal year of the Trust. Unit owners are referred to the full text of the Reserve and Depletion Report contained herein for further details. In connection with the information in the Reserve and Depletion Report, note should be taken of the limited nature of the information available to the Trust. Pursuant to the arrangements under which the Trust holds royalty rights and due to the fact that the Trust is not considered an operating company within Germany, it has no access to the operating companies' proprietary information concerning producing field reservoir data. The Trustees have been advised that publication of such information is not required under applicable law in Germany and that the royalty rights do not give rise to the right to require or compel the release of such information. Past efforts to obtain such information have not been successful. The information made available to the Trust by the operating companies does not include any of the following: reserve estimates, capitalized costs, production cost estimates, revenue projections, producing field reservoir data (including pressure data, permeability, porosity and thickness of producing zone) or other similar information. The limited nature of the information available to the Trust makes many calculations impossible including the following among others: proved undeveloped or probable future net recoverable oil and gas by appropriate geographic areas, total gross and net productive wells, availability of oil and gas from the present reserve, contract supply for one year or acreage concentration. The Trust has the authority to audit for certain limited purposes the operating companies' sales and production from the royalty areas. The Trust also has access to published materials in Germany from W.E.G. (a German organization equivalent to the American Petroleum Institute or the American Gas Association). The use of such statistical information relating to - 9 - production and sales necessarily involves extrapolations and projections. Both Davis Associates and the Trustees believe the use of the material available is appropriate and suitable for preparation of the estimates described in the Reserve and Depletion Report. Both the Trustees and Davis Associates believe this report and these estimates to be reasonable and appropriate but they would possibly vary from statistical projections which could be made if reservoir production information (of the kind normally available to domestic producing companies) were available. The limited information available makes it inappropriate to make projections or estimates of proved or probable reserves of any category or class other than the estimated net proved producing reserves described in the Reserve and Depletion Report. Attachment A of the Reserve and Depletion Report is comprised of a schedule of estimated net proved producing reserves of the Trust's royalty properties, computed as of October 1, 2001 and a five year schedule of gas, sulfur and oil sales for the 12 months ended September 30, 2001, 2000, 1999, 1998 and 1997 computed from quarterly sales reports of operating companies received by the Trust during such periods. Item 3. Legal Proceedings. ------------------ In implementation of the provisions of the order of the Delaware Court of Chancery dated February 26, 1996 (the "Delaware Order"), reported n Form 8-K filed February 26, 1996, on December 4, 2001, the Trust and the Administrator of Unclaimed Property, Office of the New York State omptroller (the "New York Administrator") entered into a Settlement Agreement covering Units for which owners were unlocated but New York state addresses were shown in predecessor corporation records. The New York Settlement Agreement covers 89,220 Units attributable to stock ownership by unlocated shareholders of predecessor corporate entities. A copy of the New York Settlement Agreement is filed as Exhibit 99.1 to this Report. Of the Units covered by the Settlement Agreement, 44,610 were issued to the New York Administrator prior to December 31, 2001 and the balance of 44,610 will be issued on or before June 30, 2005. The Settlement Agreement provides for processing of claims in the period until June 30, 2005 and the sharing of any costs relating to any claims which are allowed. After June 30, 2005, under the Delaware Order, no payments will be required for arrearages in dividends or distributions to allowed claims and the existing contingent liability concerning them will be eliminated. The 44,610 Units issued now will receive regular distributions of Trust royalty income. Their issuance results in a de minimus reduction (amounting to 0.502%) in Trust distributions to existing owners. Management of the Trust intends to continue the implementation program permitted by the Delaware Order with other states, but the impact of any such implementation will be minimal in view of the limited numbers of addresses listed in each of the other states. - 10 - Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- Inapplicable. - 11 - PART II Item 5. Market for the Registrant Trust's Units of Beneficial Interest -------------------------------------------------------------- and Related Unit Owner Matters. ------------------------------- The Trust's units of beneficial interest ("Units") are traded on the New York Stock Exchange (the "NYSE") under the symbol NET. In addition, the Midwest Stock Exchange and the Boston Exchange have granted unlisted trading privileges in the Trust Units. Under the Trust Agreement, the Trustees distribute to unit owners, on a quarterly basis, the net royalty income after deducting expenses and reserving limited funds for anticipated administrative expenses. The following table presents the high and low closing prices for the quarterly periods ended in fiscal 2001 and 2000 as reported by the NYSE as well as the cash distributions paid to unit owners by quarter for the past two fiscal years. FISCAL YEAR 2001 Low High Distribution Closing Closing Per Quarter Ended Price Price Unit - ------------- --------- --------- ------------ January 31, 2001 15.1250 17.8500 .71 April 30, 2001 17.0000 20.9000 .61 July 31, 2001 17.7000 20.6500 .54 October 31, 2001 16.2500 19.4500 .60 FISCAL YEAR 2000 Low High Distribution Closing Closing Per Quarter Ended Price Price Unit - ------------- --------- --------- ------------ January 31, 2000 13.0000 15.5000 .39 April 30, 2000 12.3125 15.1250 .41 July 31, 2000 12.5000 17.0625 .43 October 31, 2000 14.1250 18.1250 .33 - 12 - The quarterly distributions to unit owners represent their undivided interest in royalty payments from sales of gas, sulfur and oil during the previous quarter. Each unit owner is entitled to recover a portion of his or her investment in these royalty rights through a cost depletion percentage. The calculation of this cost depletion percentage is set forth in detail in Attachment B to the Reserve and Depletion Report attached as Exhibit 99.1. This report has been prepared by Davis Associates using the limited information described under Item 2, Properties, to which reference is made. The Trustees believe that the calculations and assumptions used in this report are reasonable under the facts and circumstances of available information. The cost depletion percentage recommended by the Trust's independent petroleum and natural gas consultants for calendar 2001 is 9.2385%. Specific details relative to the Trust's income and expenses and cost depletion percentage as they apply to the calculation of taxable income for the 2001 calendar year are included on a special removable page in the 2001 Annual Report under "Note to Unit Owners" and have been sent in a separate letter to all unit owners who were registered at any time during 2001 and who are no longer registered owners as of year end. The Trust maintains no reserve to cover any payments which might be required if the holders of shares of stock of the predecessor Corporation or Company, who have not yet exchanged those shares for Units, should surrender them for exchange. See Item 7 and Note 3 to the Financial Statements in Item 8 of this Report. As of December 31, 2001, there were 1,441 Unit owners of record, which figure does not include the owners of unexchanged shares of stock in the Corporation or the Company (a total of 604 record holders). The owners of shares of stock in the Corporation are entitled under Section 3.10 of the Trust Agreement to receive Units upon presentation of those shares or other evidences of ownership thereof. The owners of unexchanged shares of stock in the Company, for whom a nominee of the Bank of New York acts as agent under a shareholder agency agreement, are entitled to receive Units upon presentation of those shares or other evidences of ownership thereof. Management continues to believe that the number of such presentations will continue to be immaterial in the coming years. In all events, after the year 2005, pursuant to the provisions of the order of the Delaware Court of Chancery of April 17, 1996, further liability for payment of dividends or distributions arrears will be eliminated. See Note 3 to the Financial Statements contained herein for further information. - 13 - ITEM 6. Selected Financial Data ----------------------- North European Oil Royalty Trust -------------------------------- Selected Financial Data (Cash Basis) ------------------------------------ For Five Years Ended October 31, 2001 ------------------------------------- 2001 2000 1999 1998 1997 ----------- ----------- ----------- ----------- ----------- German gas, oil and sulfur royalties received $22,453,630 $14,155,028 $10,667,478 $13,881,870 $13,651,678 =========== =========== =========== =========== =========== Net Income on a cash basis $21,906,824 $13,668,262 $10,168,423 $13,397,013 $13,070,207 =========== =========== =========== =========== =========== Net Income per unit on a cash basis (a) $2.47 $1.54 $1.17 $1.54 $1.50 ===== ===== ===== ===== ===== Units of beneficial interest outstanding at end of year (a) 8,886,804 8,886,804 8,696,646 8,696,460 8,696,430 Cash distributions paid or to be paid: Dividends and distributions per unit paid to former unlocated shareholders $0.00 $0.00 $0.00 $0.00 $0.00 Distributions per unit paid or to be paid to unit owners $2.46 $1.56 $1.17 $1.54 $1.51 ----- ----- ----- ----- ----- $2.46 $1.56 $1.17 $1.54 $1.51 ===== ===== ===== ===== ===== Total assets at end of year $ 5,391,321 $ 2,946,597 $ 2,319,173 $ 2,765,902 $ 3,024,318 =========== =========== =========== =========== =========== (a) Net income per unit on a cash basis was calculated based on the number of units of beneficial interest outstanding at the end of the year. - 14 - Item 7. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations. -------------------------- General - ------- The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses and distributes the remaining net funds to its unit owners. The Trust is not involved in any business or extractive operations of any kind in the areas over which it holds royalty rights and is precluded from any such involvement by the Trust Agreement. There are no requirements, therefore, for capital resources with which to make capital expenditures or investments in order to continue the receipt of royalty revenues by the Trust. The operating companies, subsidiaries of Exxon Mobil Corp. and the Royal Dutch Group, pay monthly royalties to the Trust based on their sales of natural gas, sulfur and oil. The Oldenburg concession is the primary area from which these products are extracted and provides nearly 100% of all the royalties received by the Trust. Of these three products, natural gas provides approximately 98% of the total royalties. The gas is sold to various distributors under long term contracts which delineate, among other provisions, the timing, manner, volume and price of the gas sold. The pricing mechanisms contained in these contracts include a delay factor of three to six months and use the price of light heating oil in Germany as one of the primary pricing components. Since Germany must import a large percentage of its energy requirements, the U.S. dollar price of oil on the international market has a significant, although delayed, impact on the price of gas. The Trust does not conduct any active business operations and has only limited need of funds for its own administrative services. These funds are used to pay Trustees' fees (computed under the Trust Agreement and based upon a percentage of royalties and interest income received), the remuneration fixed by the Trustees for the Managing Trustee and the Managing Director, expenses associated with the Trustees' meetings, professional fees paid to consultants, legal advisors and auditors, transfer agent fees, and secretarial and other general office expenses. Another requirement for funds by the Trust relates to the occasional necessity of making lump sum payments of arrearages of dividends of a corporate predecessor and distributions previously declared by the Trust. The payment of such arrearages would require a reduction in the amount of distributions which otherwise would be made on presently outstanding units. For further information on this contingent liability and the impact of the Delaware Court order see Item 3, Legal Proceedings, and Note 3 to Financial Statements contained herein. The Trust has no means of assuring continued income from overriding royalty rights at their present level or otherwise. Economic and political factors which are not foreseeable may have an impact on Trust - 15 - income. The effect of changing economic conditions on the demand for energy throughout the world and future prices of oil and gas cannot be accurately projected. The relatively small amounts required for administrative expenses of the Trust limit the possible effect of inflation on its financial prospects. Continued price inflation would be reflected in sales prices, which, with sales volumes, form the basis on which the royalties paid to the Trust are computed. In addition, fluctuations in the euro/dollar exchange rate have an impact on domestic energy prices within Germany and on the amount of dollars received upon conversion. The impact of inflation or deflation on energy prices in Germany is delayed by the use in certain long-term gas sales contracts of a deferred "trailing average" related to light fuel oil prices. Fiscal 2001 versus Fiscal 2000 - ------------------------------ For fiscal 2001 the Trust's gross royalty income increased 58.6% from $14,155,028 to $22,453,630. The lingering impact of higher world oil prices on German gas prices as well as reduced maintenance downtime at the Grossenkneten desulfurization plant, which resulted in higher gas sales from the higher royalty area of western Oldenburg, combined to produce the increase in royalties. The Euro continued to exhibit its weakness relative to the dollar. For each of the first three quarters the dollar value of the Euro was below that of the prior year and only in the final quarter did the value of the Euro increase over the prior year's quarter. The high world oil prices that lingered into the first half of fiscal 2001 continued to be reflected through the contractual delay mechanism in the high gas prices for gas sold from the Oldenburg concession throughout the year. For the first three quarters, average Oldenburg gas prices under the lower royalty rate agreement posted quarter over quarter increases reaching a high point of 1.8718 Euro cents per kilowatt hour ("Ecents/Kwh") in the third quarter. The decline in oil prices was finally reflected in gas prices during the fourth quarter with average gas prices falling to 1.5950 Ecents/Kwh. For the year, average gas prices posted a 63.9% increase to a value of 1.6643 Ecents/Kwh. Average gas prices under the higher royalty rate agreement followed a similar track rising to a high point of 1.7552 Ecents/Kwh in the third quarter before falling back to 1.6723 Ecents/Kwh in the fourth quarter. In average for the year, gas prices increased 61.5% to 1.6415 Ecents/Kwh. When we use the average exchange rates and convert prices measured in Ecents/Kwh into more familiar terms of dollars/Mcf, we see average gas prices under the lower and higher royalty rate agreements of $4.18/ Mcf and $4.19/Mcf, increases of 38.4% and 52.9%, respectively. For fiscal 2001 overall Oldenburg gas sales showed a slight decline for the year falling 1.44% from 218.7 billion cubic feet ("BCF") to 215.6 BCF. This decline, which was concentrated in the lower royalty rate area of eastern Oldenburg, was more than offset by an increase in gas sales from the higher royalty rate area of western Oldenburg. Western Oldenburg gas sales increased 5.7% from 93.2 BCF to 98.5 BCF in total for the year. In contrast to the prior year when the Grossenkneten plant underwent a sizeable - 16 - multi-year renovation and repair program which entailed an extended reduction in processing capacity, the impact of this year's scheduled maintenance was comparatively minor. Since the gas in western Oldenburg is predominantly sour gas (which must be processed to remove the hydrogen sulfide component) the reduced downtime at Grossenkneten permitted operations to resume more quickly resulting in increased gas sales. With an effective royalty rate in western Oldenburg seven times greater than the royalty rate in eastern Oldenburg, changes in the percentage of sales originating from western Oldenburg can have significant effects on the level of Trust royalties. The percentage of western sales to total sales increased in fiscal 2001 from 42.60% to 45.7% reflecting the reduced downtime at the desulfurization plant. Since reaching its current all time low, based on the transfer rate for the Trust's royalties, of a dollar equivalent value of $0.8626 during the Trust's third fiscal quarter, the Euro has maintained some stability. In average for the year, the Euro declined 5% from a dollar equivalent of $0.9417 for fiscal 2000 to $0.8945 for fiscal 2001. Trust expenses increased by 17.3% from $583,226 to $684,111 reflecting higher Trustee's fees pursuant to the formula contained in the Trust Agreement and higher Trust expenses. Interest income increased 42.3% from $96,460 to $137,305 reflecting greater sums available for investment. During fiscal 2001 and 2000 respectively, an additional 0 and 30 Trust units were issued and $0 and $1,043 were paid to former unlocated shareholders of North European Oil Corporation and North European Oil Company who presented shares for exchange or filed properly documented affidavits of loss and obtained an unlimited, open penalty indemnity bond. Management continues to believe that the number of such presentations will continue to be immaterial in the coming years. In all events, after the year 2005, pursuant to the provisions of the order of the Delaware Court of Chancery of April 17, 1996, further liability for payment of dividends or distributions arrears will be eliminated. See Note 3 to the Financial Statements contained herein for further information. Fiscal 2000 versus Fiscal 1999 - ------------------------------ For fiscal 2000 the Trust's gross royalty income increased 32.7% from $10,667,478 to $14,155,028. The substantial increase in world oil prices experienced during 2000 continued to be reflected in the higher gas prices and accounted for the entire increase in the Trust's royalties. The shutdown for maintenance and repairs of the Grossenkneten desulfurization plant during the fourth quarter accounted for the majority of the decline in gas sales. The Euro remained under pressure throughout the year and continued the decline in value begun shortly after its introduction in January 1999. The sustained increase in world oil prices during 2000 was reflected to a growing degree throughout the year in the price of gas sold under the overriding royalty agreements covering the Oldenburg concession. Under the - 17 - higher royalty rate agreement covering gas sales from western Oldenburg, gas prices measured in pfennigs per kilowatt hour ("Pf/Kwh") climbed from 1.6136 Pf/Kwh in the first quarter of fiscal 2000 to 2.4459 Pf/Kwh in the fourth quarter, an increase of 51.6%. Under the lower royalty rate agreement covering gas sales from the entire Oldenburg concession, gas prices increased 59% from 1.5587 Pf/Kwh in the first quarter to 2.4786 Pf/Kwh in the fourth quarter. Under both the higher and lower royalty rate agreements covering gas sales from the Oldenburg concession, gas sales through the first nine months showed increases of 3% and 2.5%, respectively. During the fourth quarter, however, the Grossenkneten desulfurization plant experienced significant downtime while the operating companies conducted extensive maintenance and repair operations. These operations following previous changes in the maintenance timetable were significantly more extensive than last year's and required a more complete suspension of production activity at the plant resulting in a significant decline in fourth quarter gas sales. For the entire year under the higher and lower royalty rate agreements, gas sales declined 2.4% to 93.2 Billion cubic feet ("Bcf") and 1.1% to 218.7 Bcf., respectively. With an effective royalty rate in western Oldenburg seven times greater than the royalty rate in eastern Oldenburg, changes in the percentage of sales originating from western Oldenburg can have significant effects on the level of Trust royalties. The percentage of western sales to total sales declined in fiscal 2000 to 42.60% from 43.17% in fiscal 1999. Since the bulk of gas extracted from wells located in western Oldenburg is sour gas, the more extensive shutdown of the desulfurization plant in the fourth quarter disproportionately affected the level of western sales. Fiscal 2000 showed no relief from the continued decline in the value of the Euro since shortly after its introduction in January 1999. After a brief respite in the fourth quarter of fiscal 1999, the Euro had four consecutive quarters of quarter-to-quarter declines. Based on the exchange rates utilized at the times of the various transfers of royalties from Germany to the U.S., the average dollar equivalent value of the Euro for the first quarter of fiscal 2000 was $1.0043. The average values for the second through fourth quarters were $0.9511, $0.9304 and $0.8810, respectively. The Euro's decline has continued into the first quarter of fiscal 2001 as well. The impact on Trust royalties of changes in the Euro/dollar exchange rates are twofold. There is an immediate impact on Trust royalties because at the end of every month German royalty payments are transferred to the United States and the exchange rate determines the amount of dollars the Trust receives. The long term impact is derived from the pricing mechanism which, in part, uses the price of light heating oil in Germany to determine the price of gas sold under the various sales contracts. The price of light heating oil, in turn, is affected by the price in dollars of oil on the international market. Over time, the short and long term impact of changes in the exchange rate tend to offset each other to varying degrees. Despite the decline in the exchange rates, when we apply the average exchange rates to gas prices in the various quarters, we see a steady increase through the year. Under the higher royalty rate agreement, gas prices began the year at - 18 - the equivalent price of $2.40 per Mcf and finished the year at $3.17 per Mcf. Under the lower royalty rate agreement, gas prices began the year at the equivalent price of $2.23 per Mcf and finished the year at $3.17 per Mcf. Trust expenses increased 2.5% from $569,081 to $583,226 primarily due to increased Trustees fees which are controlled by provisions in the Trust Agreement based on Trust royalties. Interest income increased 38% from $70,026 to $96,460 primarily due to the increase in funds available for investment. During fiscal 2000 and 1999 respectively, an additional 30 and 186 Trust units were issued and $1,043 and $6,425 were paid to former unlocated shareholders of North European Oil Corporation and North European Oil Company who presented shares for exchange or filed properly documented affidavits of loss and obtained an unlimited, open penalty indemnity bond. Management continues to believe that the number of such presentations will continue to be immaterial in the coming years. In all events, after the year 2005, pursuant to the provisions of the order of the Delaware Court of Chancery of April 17, 1996, further liability for payment of dividends or distributions arrears will be eliminated. See Note 3 to the Financial Statements contained herein for further information. ----------------------------------- This report on Form 10-K contains forward looking statements concerning business, financial performance and financial condition of the Trust, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in any forward looking statement. The statements contained herein are based on the Trustees' current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties. Actual results and events may vary significantly from those discussed in the forward looking statements. - 19 - Item 8. Financial Statements and Supplementary Data -------------------------------------------- NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- INDEX TO FINANCIAL STATEMENTS ------------------------------ Page Number ----------- Report of Independent Public Accountants F-1 Financial Statements: Statements of Assets, Liabilities and Trust Corpus as of October 31, 2001 and 2000 F-2 Statements of Income and Expenses on a Cash Basis for the Years Ended October 31, 2001, 2000 and 1999 F-3 Statements of Undistributed Earnings for the Years Ended October 31, 2001, 2000 and 1999 F-4 Statements of Changes in Cash and Cash Equivalents for the Years Ended October 31, 2001, 2000 and 1999 F-5 Notes to Financial Statements F-6 - F-9 Schedules are omitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto. - 20 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To North European Oil Royalty Trust: We have audited the accompanying statements of assets, liabilities and trust corpus of North European Oil Royalty Trust as of October 31, 2001 and 2000 and the related statements of income and expenses on a cash basis, undistributed earnings and changes in cash and cash equivalents for each of the three years in the period ended October 31, 2001. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accounts of the Trust are maintained on the cash basis of accounting under which income is not recorded until collected instead of when earned, and expenses are recorded when paid instead of when incurred. Thus, the accompanying financial statements are not intended to present financial position and results of operations in conformity with generally accepted accounting principles which require the use of the accrual basis of accounting (see Note 1). In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and trust corpus of North European Oil Royalty Trust as of October 31, 2001 and 2000, and its income and expenses, undistributed earnings and changes in cash and cash equivalents for each of the three years in the period ended October 31, 2001, all on the cash basis of accounting. As discussed in Note 3, the Trust has a contingent liability relating to unclaimed units and distributions. No reserves are established or reflected in the financial statements for the possibility that funds would be required to satisfy such claims. /s/ ARTHUR ANDERSEN LLP Roseland, New Jersey November 8, 2001 (except with respect to Note 4 as to which the date is December 4, 2001) F-1 - 21 - NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1) ----------------------------------------------------------- OCTOBER 31, 2001 AND 2000 ------------------------- ASSETS 2001 2000 ------ ------------ ------------ Current Assets -- Cash and cash equivalents (Note 1) $5,391,320 $2,946,596 Producing gas and oil royalty rights (Note 1) 1 1 ------------ ------------ $5,391,321 $2,946,597 ============ ============ LIABILITIES AND TRUST CORPUS ---------------------------- Current liabilities -- Cash distributions payable to unit owners, paid November 2001 and 2000 $5,332,083 $2,932,645 Contingent liability (Note 3) Trust corpus (Notes 1 and 2) 1 1 Undistributed earnings (Note 1) 59,237 13,951 ------------ ------------ $5,391,321 $2,946,597 ============ ============ The accompanying notes to financial statements are an integral part of these statements. F-2 - 22 - NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- STATEMENTS OF INCOME AND EXPENSES ON A CASH BASIS (NOTE 1) ---------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 --------------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ German gas, sulfur and oil royalties received $22,453,630 $14,155,028 $10,667,478 Interest income 96,460 70,026 101,973 Trust expenses (684,111) (583,226) ( 569,081) ------------ ------------ ------------ Net income on a cash basis $21,906,824 $13,668,262 $10,168,423 ============ ============ ============ Net income per unit on a cash basis $2.47 $1.54 $1.17 ======= ======= ======= Cash distributions paid or to be paid: Dividends and distributions per unit paid or to be paid to former unlocated shareholders (Note 3) $0.00 $0.00 $0.00 Distributions per unit paid or to be paid to unit owners (Note 4) 2.46 1.56 1.17 ------- ------- ------- $2.46 $1.56 $1.17 ======= ======= ======= The accompanying notes to financial statements are an integral part of these statements. F-3 - 23 - NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1) --------------------------------------------- FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 --------------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Balance, beginning of year $ 13,951 $ 58,044 $ 69,998 Reimbursement for prior payment of past dividends and distributions 0 0 1,017 Net income on a cash basis 21,906,824 13,668,262 10,168,423 ------------ ------------ ------------ 21,920,775 13,726,306 10,239,438 ------------ ------------ ------------ Less: Dividends and distributions paid to former unlocated shareholders (Note 3) 0 1,043 6,318 Current year distributions paid or to be paid to unit owners (Note 4) 21,861,538 13,711,312 10,175,076 ------------ ------------ ------------ 21,861,538 13,712,355 10,181,394 ------------ ------------ ------------ Balance, end of year $ 59,237 $ 13,951 $ 58,044 ============ ============ ============ The accompanying notes to financial statements are an integral part of these statements. F-4 - 24 - NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1) ----------------------------------------------------------- FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 --------------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Sources of cash and cash equivalents: German gas, sulfur and oil royalties received $22,453,630 $14,155,028 $10,667,478 Interest income 137,305 96,460 70,026 Reimbursement for prior payment of past dividends and distributions 0 0 1,017 ------------ ------------ ------------ 22,590,935 14,251,488 10,738,521 Uses of cash and cash equivalents: Payment of Trust expenses 684,111 583,226 569,081 Distributions and dividends paid (Note 3) 19,462,100 13,040,838 10,616,169 ------------ ------------ ------------ 20,146,211 13,624,064 11,185,250 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents during the year 2,444,724 627,424 ( 446,729) Cash and cash equivalents, beginning of year 2,946,596 2,319,172 2,765,901 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 5,391,320 $2,946,596 $ 2,319,172 ============ ============ ============ The accompanying notes to financial statements are an integral part of these statements. F-5 - 25 - NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- OCTOBER 31, 2001, 2000 AND 1999 ------------------------------- (1) Summary of significant accounting policies: ---------------------- Basis of accounting - --------------------- The accounts of North European Oil Royalty Trust (the "Trust") are maintained on a cash basis of accounting with the exception of the accrual for distributions to be paid to unit owners (those distributions approved by the Trustees for the Trust). The Trust's distributable income represents royalty income received by the Trust during the period plus interest income less any expenses incurred by the Trust, all on a cash basis. In the opinion of the Trustees, the use of the cash basis provides a more meaningful presentation to unit owners of the results of operations of the Trust. Use of Estimates - ------------------ The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates. Producing gas and oil royalty rights - -------------------------------------- The rights to certain gas and oil royalties in Germany were transferred to the Trust at their net book value by North European Oil Company (the "Company") (see Note 2). The net book value of the royalty rights has been reduced to one dollar ($1) in view of the fact that the remaining net book value of royalty rights is de minimis relative to annual royalties received and distributed by the Trust and does not bear any meaningful relationship to the fair value of such rights or the actual amount of proved producing reserves. F-6 - 26 - Federal and state income taxes- ------------------------------- The Trust, as a grantor trust, is exempt from Federal and state income taxes under a private letter ruling issued by the Internal Revenue Service. Cash and cash equivalents- -------------------------- Included in cash and cash equivalents are amounts deposited in bank accounts and amounts invested in certificates of deposit and U. S. Treasury bills with maturities of three months or less. Net income per unit on the cash basis- -------------------------------------- Net income per unit on the cash basis is based upon the number of units outstanding at the end of the period (see Note 3). As of October 31, 2001, 2000 and 1999, there were 8,886,804, 8,886,804 and 8,696,646 units of beneficial interest outstanding, respectively. (2) Formation of the Trust: ----------------------- The Trust was formed on September 10, 1975. As of September 30, 1975, the Company was liquidated and the remaining assets and liabilities of the Company, including its royalty rights, were transferred to the Trust. The Trust on behalf of the owners of beneficial interest in the Trust holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany. These rights are held under contracts with local German exploration and development subsidiaries of Exxon Mobil Corp. and the Royal Dutch Group. Under these contracts, the Trust receives various percentage royalties on the proceeds of the sales of certain products from the areas involved. At the present time, royalties are received for sales of gas well gas, oil well gas, crude oil, distillate and sulfur. (3) Contingent liability: --------------------- The Trust serves as fiduciary for certain unlocated or unknown shareholders of the Trust's corporate predecessors, North European Oil Corporation (the "Corporation") and North European Oil Company. From the liquidation of the Company to October 31, 2000, 721,364 Trust units were issued in exchange for Corporate or Company shares and dividends of $354,101 and distributions of $4,236,544 were paid to former unlocated Corporation and Company shareholders. For the year ended October 31, 2001, no units were issued in F-7 - 27 - exchanges and no dividends and no distributions were paid to former unlocated Corporation and Company shareholders. On February 26, 1996 the settlement of litigation between the Trust and the Delaware State Escheator was approved by the Delaware Court of Chancery. As of that date, there were a total of 875,748 authorized but unissued units representing the unexchanged shares of the Trust's corporate predecessors. Out of this total, 760,560 units were subject to the settlement. Pursuant to the Court approved settlement, 380,280 units were issued to the Escheator on April 17, 1996. Of the Trust units remaining to be issued to the Escheator, approximately 50% (190,128 units) have been issued to the Escheator as of June 30, 2000 and the remaining balance will be issued by June 30, 2005. Through June 30, 2000, claims by unlocated or unknown shareholders of the Trust's corporate predecessors for units and past dividends and distributions thereon ("subsequent claims") were paid by the Escheator and the Trust on a 50:50 basis. From July 1, 2000 to June 30, 2005, subsequent claims will be paid by the Escheator and the Trust on a 75:25 basis. Any subsequent claims will reduce the number of units to be issued to the Escheator in 2005. Following the final issuance of units to the Escheator in 2005, the Trust's contingent liability for past dividends and distributions attributable to all unexchanged Corporation and Company shares subject to the settlement will be completely eliminated. Under the terms of the settlement, the maximum liability of the Escheator for subsequent claims is limited to the value of the units received, plus current distributions on units retained, less the Escheator's share of subsequent claims. As of the receipt of the November, 2001 distribution, the maximum liability of the Escheator will be $11,638,204. Under the Trust Agreement as deemed amended by the February 26, 1996 Order of the Delaware Court of Chancery, the Trust is not required to make payments of arrearages of Company dividends or Trust distributions with respect to units issued or to be issued to the Escheator. As of October 31, 2001, there remained a total of 303,786 units that could be issued to unlocated or unknown Corporation and Company shareholders. Of this total, 190,122 units are subject to the settlement and remain to be issued to the Escheator. If all shares, represented by the units already issued as well as the units remaining to be issued, were presented for exchange, $487,023 in dividends and $29,889,710 in distributions would be payable. In the opinion of the Trustees, based in part on the history of exchanges during the last ten fiscal years, the maximum liability of the Escheator would be adequate to cover the Escheator's share of any subsequent claims. In any event, the Trust's contingent liability for such claims will be eliminated in 2005. F-8 - 28 - (4) Subsequent Event: ----------------- In implementation of the provisions of the order of the Delaware Court of Chancery dated February 26, 1996 (the "Delaware Order"), and reported on Form 8-K filed February 26, 1996, on December 4, 2001, the Trust and the Administrator of Unclaimed Property, Office of the New York State Comptroller (the "New York Administrator") entered into a Settlement Agreement covering Units for which owners were unlocated but New York state addresses were shown in predecessor corporation records. The New York Settlement Agreement covers 89,220 Units attributable to stock ownership by unlocated shareholders of predecessor corporate entities. Of the Units covered by the Settlement Agreement, 44,610 would be issued to the New York Administrator prior to December 31, 2001 and the balance of 44,610 will be issued on or before June 30, 2005. The Settlement Agreement provides for processing of claims in the period until June 30, 2005 and the sharing of any costs relating to any claims which are allowed. After June 30, 2005, under the Delaware Order, no payments will be required for arrearages in dividends or distributions to allowed claims and the existing contingent liability concerning them will be eliminated. The 44,610 Units issued now will receive regular distributions of Trust royalty income. Their issuance results in a de minimis reduction (amounting to 0.502%) in Trust distributions to existing owners. Management of the Trust intends to continue the implementation program permitted by the Delaware Order with other states, but the impact of any such implementation will be minimal in view of the limited numbers of addresses listed in each of the other states. - 29 - (5) Quarterly results (unaudited): ------------------------------ The table below summarizes the quarterly results and distributions of the Trust for the years ended October 31, 2001 and 2000. Fiscal 2001 by Quarter and Year ------------------------------------------------------------- First Second Third Fourth Year ---------- ---------- ---------- ---------- ------------- Royalties received $6,441,960 $5,574,374 $4,983,996 $5,453,300 $22,453,630 Net income on a cash basis 6,322,861 5,395,154 4,870,571 5,318,238 21,906,824 Net income per unit on a cash basis .71 .61 .55 .60 2.47 Current year cash distributions paid or to be paid 6,309,631 5,420,950 4,798,874 5,332,083 21,861,538 Current year cash distributions per unit .71 .61 .54 .60 2.46 Fiscal 2000 by Quarter and Year ------------------------------------------------------------- First Second Third Fourth Year ---------- ---------- ---------- ---------- ------------- Royalties received $3,499,675 $3,682,978 $3,966,769 $3,005,606 $14,155,028 Net income on a cash basis 3,366,006 3,541,412 3,866,073 2,894,771 13,668,262 Net income per unit on a cash basis .39 .41 .43 .33 1.54 Current year cash distributions paid or to be paid 3,391,704 3,565,637 3,821,326 2,932,645 13,711,312 Current year cash distributions per unit .39 .41 .43 .33 1.56 F-9 - 30 - Item 9. Changes in and Disagreements with Accountants on Accounting ----------------------------------------------------------- and Financial Disclosure. ------------------------- Inapplicable. PART III Item 10. Directors and Executive Officers of the Registrant. --------------------------------------------------- The identity, business experience, relationships, and other information about the Trustees as set forth under the caption "Election of Trustees" in Registrant's definitive Proxy Statement, dated January 10 2002, as filed with the Commission, are incorporated herein by reference in accordance with Instruction G(3) to Form 10-K. See "Executive Officers of the Trust" under Item 1 for information concerning the executive officers of the Trust. Item 11. Executive Compensation. ----------------------- The information about remuneration of the Trustees and Management as set forth under the caption "Management Compensation" in Registrant's definitive Proxy Statement, dated January 10, 2002, as filed with the Commission, is incorporated herein by reference in accordance with Instruction G(3) to Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------- The information about security ownership of certain beneficial owners and Management as set forth in the introduction to and under the caption "Election of Trustees" in Registrant's definitive Proxy Statement dated January 10, 2002, as filed with the Commission, is incorporated herein by reference in accordance with Instruction G(3) to Form 10-K. Item 13. Certain Relationships and Related Transactions. ----------------------------------------------- The information about certain relationships and related transactions as set forth under the captions "Election of Trustees" and "Management Compensation" in Registrant's definitive Proxy Statement, dated January 10, 2002 as filed with the Commission, is incorporated herein by reference in accordance with Instruction G(3) to Form 10-K. - 31 - PART IV Item 14. Exhibits, Financial Statements, and Reports on Form 8-K. -------------------------------------------------------- (a) The following is a list of the documents filed as part of this report: 1. Financial Statements Index to Financial Statements for the Years Ended October 31, 2001, 2000 and 1999 Report of Independent Public Accountants Statements of Assets, Liabilities and Trust Corpus as of October 31, 2001 and 2000 Statements of Income and Expenses on a Cash Basis for the Years Ended October 31, 2001, 2000 and 1999 Statements of Undistributed Earnings for the Years Ended October 31, 2001, 2000 and 1999 Statements of Changes in Cash and Cash Equivalents for the Years Ended October 31, 2001, 2000 and 1999 Notes to Financial Statements 2. Exhibits The Exhibit Index following the signature page lists all exhibits filed with this report or incorporated by reference. (b) No Current Report on Form 8-K was filed during the last quarter of the period covered by this Report. - 32 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Trust has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTH EUROPEAN OIL ROYALTY TRUST Dated: January 10,2002 By: /s/ John H. Van Kirk ------------------------- John H. Van Kirk, Managing Trustee Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: January 10, 2002 /s/ John H. Van Kirk -------------------------------- John H. Van Kirk, Trustee Dated: January 10, 2002 /s/ Robert P. Adelman -------------------------------- Robert P. Adelman, Trustee Dated: January 10, 2002 /s/ Samuel M. Eisenstat -------------------------------- Samuel M. Eisenstat, Trustee Dated: January 10, 2002 /s/ Willard B. Taylor -------------------------------- Willard B. Taylor, Trustee - 33 - Exhibit Index ------------- Exhibit Page - ------- ---- (3) Trust Agreement, dated September 10, 1975, amended May 13, 1976, and February 10, 1981, (incorporated by reference to Exhibit 4(i) to Form 10-Q for the quarter ended April 30, 1981 (File No. 0-8378)). (10.1) Agreement with OEG, dated April 2, 1979, exhibit to Current Report on Form 8-K, filed May 11, 1979 (incorporated by reference as Exhibit 1 to Current Report on Form 8-K, filed May 11, 1979 (File No. 0-8378)). (10.2) Agreement with Mobil Oil, A.G. concerning sulfur royalty payment, dated March 30, 1979, (incorporated by reference to Exhibit 3 to Current Report on Form 8-K, filed May 11, 1979 (File No. 0-8378)). (22) There are no parents and no subsidiaries of the Trust. (99.1) Estimate of Remaining Proved Producing Reserves 34 in the Northwest Basin of the Federal Republic of Germany as of October 1, 2001 and Calculation Of Cost Depletion Percentage for the 2001 Calendar Year prepared by Ralph E. Davis Associates, Inc. (99.2) Order Approving Settlement signed by Vice Chancellor Jack Jacobs of the Delaware Court of Chancery on Form 8-K, filed February 26, 1996. EX-99 3 resrvs01.txt 2001 RALPH E. DAVIS RESERVE REPORT NORTH EUROPEAN OIL ROYALTY TRUST ESTIMATE OF REMAINING PROVED PRODUCING RESERVES IN THE NORTHWEST BASIN OF THE FEDERAL REPUBLIC OF GERMANY AS OF OCTOBER 1, 2001 AND CALCULATION OF COST DEPLETION PERCENTAGE FOR 2001 CALENDAR YEAR RALPH E. DAVIS ASSOCIATES, INC. HOUSTON, TEXAS DECEMBER, 2001 T A B L E O F C O N T E N T S Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Description of Holdings. . . . . . . . . . . . . . . . . . . . . . . . . .2 Limitations of Available Data. . . . . . . . . . . . . . . . . . . . . . .3 Oldenburg Area - Sales and Reserves. . . . . . . . . . . . . . . . . . . .4 Net Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Calculation of Cost Depletion Percentage . . . . . . . . . . . . . . . . .6 Certificate of Qualification . . . . . . . . . . . . . . . . . . . . . . .8 Attachment A : Reserve Summary and Five Year Net Sales History . . . . . . . . . . .9 Attachment B : Calculation of Cost Depletion Percentage. . . . . . . . . . . . . . 10 Ralph E. Davis Associates, Inc. Consultants - Petroleum and Natural Gas 3555 Timmons Lane - Suite 1105 Houston, Texas 77027 (713) 622-8955 December 21, 2001 The Trustees of North European Oil Royalty Trust P. O. Box 456 Red Bank, New Jersey 07701 Gentlemen: In accordance with your request, we have prepared a report of the estimated remaining proved producing reserves attributable to the overriding royalty interest of North European Oil Royalty Trust (the "Trust" or "NEORT") in the Northwest German Basin of the Federal Republic of Germany as of October 1, 2001. The proved producing reserves are as of October 1, 2001 and the reported sales are for the twelve month period ending September 30, 2001. The use of the period ending September 30, 2001 is consistent with prior years and allows the timely calculation of the royalty reserves and the cost depletion percentage for the calendar year. In addition, based on the information contained in the first portion of this report, we have performed the calculations necessary to derive the cost depletion percentage for the 2001 calendar year. As detailed in Attachment B, the cost depletion percentage for the 2001 calendar year for Trust unit owners is equal to 9.2385 % of their cost base as of January 1, 2001. North European Oil Royalty Trust December 21, 2001 Page 2 DESCRIPTION OF HOLDINGS ----------------------- The Trust holds various overriding royalty rights on sales of gas, sulfur and oil from certain concessions and leases in the Federal Republic of Germany. The Oldenburg concession (1,398,000 acres), covering virtually the entire former State of Oldenburg and located in the State of Lower Saxony, is the major source of royalty income for the Trust. Although the Trust has interests in other producing areas, reserves and net sales for these areas are no longer used in the calculation of annual cost depletion percentage. While the Trust continues to receive royalty payments from some of these interests, these royalties represent less than one (1) percent of the Trust's total royalties and the expenses involved in the determination of reserve estimates for these interests are not warranted by the royalties received. The exclusion of these reserves does not have a material effect on the calculation of the cost depletion percentage. We will continue to monitor the quarterly statements and if increases are noted that could materially add reserves to the Trust, we will resume estimating future reserves. 1. The Oldenburg concession is held by Oldenburgische Erdol Gesellschaft ("OEG"). Within this concession Mobil Erdgas - Erdol GmbH ("Mobil Erdgas"), the German subsidiary of Exxon Mobil Corp. and BEB Erdgas und Erdol GmbH ("BEB"), a joint venture of Exxon Mobil Corp. and the Royal Dutch Group, carry out all exploration, drilling, production and sales activities. As a result by direct and indirect ownership, Exxon Mobil Corp. owns two-thirds of OEG and the Royal Dutch Group owns one-third of OEG. (a) Under one series of rights covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas well gas, oil well gas, crude oil and condensate. Under the royalty agreement with Mobil Erdgas there is no deduction of costs prior to the calculation of royalties from gas well gas or oil well gas, which together account for approximately 99% of all the royalties under said agreement. The Trust also receives from Mobil Erdgas a 2% royalty payment on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg. The payment of the sulfur royalty is subject to an agreement which provides that if Mobil Erdgas' selling price is below the escalated base price, payment of royalties is deferred until such time as the selling price again exceeds the escalated base price. Throughout fiscal 2001, Mobil Erdgas' selling price was below the escalated base price. We will continue to monitor this situation, but until the point that Mobil Erdgas' selling price again exceeds the escalated base price, reserves subject to this royalty will not be included in overall reserve calculations. North European Oil Royalty Trust December 21, 2001 Page 3 (b) Under another series of rights covering the entire Oldenburg concession and pursuant to an agreement with OEG (the "OEG Agreement"), the Trust receives royalties at the rate of 0.6667% on gross receipts from sales of gas well gas, oil well gas, crude oil, condensate and sulfur (removed during the processing of sour gas)less 50% of an escalating cost base. This cost base is recalculated annually based on indices reflecting changes in certain prices within Germany. Under the agreement previously reached with the operating companies, the computation system will be changed in 2002, at which time 50% of the field handling, treatment and transportation costs as reported for state royalty purposes will be deducted From gross sales receipts prior to the calculation of the royalty to be paid to the Trust. LIMITATIONS OF AVAILABLE DATA ----------------------------- The reserves considered in this report are defined as proved producing reserves. Proved producing reserves are limited to those quantities which can be expected to be recoverable commercially from known reservoirs at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Proved producing reserves do not include either proved developed non-producing reserves or any class of probable reserves. The reserve estimates were prepared using engineering methods generally accepted by the petroleum industry. The reliability of any reserve estimate is a function of the quality of available information and of engineering interpretation and judgment. The Trust, as an overriding royalty interest owner, does not receive proprietary data from the various operators on producing wells. Data, such as logs, core analysis, reservoir tests, pressure tests, gas analyses, geologic maps, and individual well production histories, which are used in volumetric and material balance type reserve estimates, are not available to the Trust. The Trust receives various monthly and quarterly statements from the operators that report production, sales and revenue data. Utilizing the same procedures as in prior years, this information, plus published information received from W.E.G. (a German organization comparable to the American Petroleum Institute or the American Gas Association), has been used to prepare this annual report. In addition, the Trust retains a part-time consultant in Germany who is familiar with the German petroleum industry in general and the operating companies in particular. His periodic reports North European Oil Royalty Trust December 21, 2001 Page 4 and communications are considered in the preparation of this report. We believe the reserve estimates prepared using all the available data represent realistic values. However, due to the limitation of available data, this estimate of reserves cannot have the same degree of accuracy that an estimate of reserves prepared using all pertinent data would have. Our experience in the evaluation of reserves using such limited, including nine (9) years of experience working for the Trust, compensates somewhat for the limitations of available data. The data in the reports received by the Trust is in metric tons and cubic meters. The following Metric to English Unit conversion factors were used: Oil: 7.23 barrels per metric ton Gas: 37.25 cubic feet per cubic meter at 14.7 psia and 60 degrees Fahrenheit Sulfur: 1.1 short tons per metric ton OLDENBURG AREA - SALES AND RESERVES ------------------------------------ The Trust's royalty income comes primarily from the Oldenburg area. Gas production accounts for the majority of the income; however, the high hydrogen sulfide content of much of the gas produced necessitates its removal before the gas can be sold. The facilities at the Grossenkneten desulfurization plant are the primary means by which the hydrogen sulfide is removed. Following renovations and improvements to the plant in 1994 and again in 1996, the plant's input capacity has been increased from 600,000 cu. meters per hour to its present capacity of 760,000 cu. meters per hour. A second desulfurization plant, NEAG, remains connected by pipeline with the transportation system of the Oldenburg concession but is currently being utilized only to a limited degree for the processing of gas from Oldenburg. During the 12 months ending September 30, 2001 total sales for the Oldenburg area were 231,494 barrels of oil and condensate, 239 million cubic feet ("MMcf") of oil well gas, 214,826 MMcf of gas well gas, and 945,431 short tons of sulfur. The sales from the western portion of Oldenburg, where the Trust has a greater interest, were 147,157 barrels of oil and condensate, 157 MMcf of oil well gas, 98,699 MMcf of gas well gas, and 324,576 short tons of sulfur. Estimated gross remaining proved producing reserves attributable to the total Oldenburg area are 2,060,695 barrels of oil and condensate, 1,276 MMcf of oil well gas, 2,532,801 MMcf of gas well gas, and 11,635,896 short tons of sulfur. North European Oil Royalty Trust December 21, 2001 Page 5 NET RESERVES ------------ To present an accurate picture of estimated proved producing reserves net to the Trust, the gross reserve figures outlined above must be modified by the impact of the different royalty rates in effect in the Oldenburg concession. A comparison of the Trust's overriding royalty rates in both the western and eastern areas of Oldenburg is as follows: Mobil Erdgas West East --------------- ---------- ---------- Oil & Gas 4% 0% Sulfur 2%* 0% BEB --------------- Oil & Gas 0.6667%** 0.6667%** Sulfur 0.6667%** 0.6667%** *Temporarily suspended. (See explanation above.) **Prior to the calculation of royalties, 50% of an escalating cost base is deducted. The application of these royalty rates to the estimated gross remaining proved producing reserves attributable to the western and eastern Oldenburg areas yields the combined estimated proved producing reserves net to the Trust. The Trust's estimated remaining net proved producing reserves as of October 1, 2001 and net sales for the twelve month period ending September 30, 2001 are as follows: Reserves Sales -------- ----- Oil, Barrels 76,874 7,205 Oil Well Gas, MMcf 31 7 Gas Well Gas, MMcf 50,683 5,159 Sulfur, Short Tons 56,434*** 4,667*** *** Note: At current price levels no royalties are being paid under the Mobil Erdgas sulfur royalty. A summary of net proved producing reserves by product and a five year history of net sales attributable to the royalty interests of the Trust are presented in Attachment A. North European Oil Royalty Trust December 21, 2001 Page 6 CALCULATION OF COST DEPLETION PERCENTAGE ---------------------------------------- The categories of proved producing reserves considered in the calculation of the cost depletion percentage are oil, oil well gas, and gas well gas. Sulphur is a by-product of gas production and is not considered in the computation of total cost depletion percentage. For each category of reserves, a product base was established for the Trust as of January 1, 1976. Through the use of these product bases, we can account for the relative size of each of these categories of reserves and the corresponding impact on the calculation of the cost depletion percentage. The product base for each category of proved producing reserves is reduced annually by an adjustment that is calculated by multiplying the product base at the beginning of the current year by the depletion factor for that category of reserves. The depletion factor for each category of reserves is the ratio of the relevant net sales during the current year to the corresponding adjusted net proved producing reserves at the beginning of the current year. Significant items in the cost depletion percentage calculation that appear on Attachment B as specific item numbers, shown in parentheses, and their sources are as follows: The adjusted estimated net proved producing reserves as of 10/1/00 Line (3) is obtained by adding the estimated remaining net proved producing reserves as of 10/1/00 Line (1) and the adjustments to reserves during the period Line (2). Therefore Line (3) = Line (1) + Line (2). The depletion factor Line (6) for each category of proved producing reserves is obtained by dividing the relevant net sales Line (4) by the corresponding adjusted estimated net proved producing reserves as of 10/1/00 Line (3). Therefore Line (6) = Line (4) / Line (3). The product base for each category of proved producing reserves as of 1/1/00 Line (7) and the adjustment taken during 2000 Line (8) were obtained from the previous year's report. The product base as of 1/1/01 Line (9) forms the initial starting point for the calculation of the cost depletion percentage for the 2001 tax year. The product base for 1/1/01 Line (9) then is Line (7) - Line (8). The adjustment to the product base for each category of proved producing reserves Line (10) is used to reduce the product base as of the beginning of each year. This adjustment is the product of the depletion factor for each category of proved producing reserves Line (6) multiplied by the corresponding product base as of 1/1/01 Line (9). Therefore Line (10) = Line (6) x Line (9). North European Oil Royalty Trust December 21, 2001 Page 7 The cost depletion percentage Line (11) then is the sum of the adjustment to the product base of each category of proved producing reserves [Sum Line (10)] divided by the sum of the product base for each category as of 1/1/01 [Sum Line (9)]. Therefore Line (11) = [Sum Line (10)] / [Sum Line (9)]. The cost depletion percentage represents the total allowable cost depletion for the current calendar year for the Trust's unit owners, expressed as a percentage of their cost base at the beginning of the calendar year. Sincerely yours, RALPH E. DAVIS ASSOCIATES, INC. /s/ Larry A. Barnett ---------------------------- Larry A. Barnett, P. E. Senior Vice-President LAB:sw North European Oil Royalty Trust December 21, 2001 Page 8 CERTIFICATE OF QUALIFICATION ---------------------------- I, Larry A. Barnett, Registered Professional Engineer, do hereby certify: 1. That I am senior vice-president of the consulting firm of Ralph E. Davis Associates, Inc. with offices at 3555 Timmons Lane, Suite 1105, Houston, Texas 77027. 2. That I have prepared a reserve report on the interests of the North European Oil Royalty Trust in the Northwest Basin of the Federal Republic of Germany as of October 1, 2001. 3. That I have no direct or indirect interest, nor do I expect to receive any direct or indirect interest, in the properties or in any securities of the North European Oil Royalty Trust. 4. That I attended The University of Texas and that I graduated with a Bachelor of Science Degree in Petroleum Engineering in 1958. 5. That I am a Registered Professional Engineer in the States of Texas and Louisiana, Registration Numbers 23399 and 9647 respectively, and that I am a member in good standing of the Society of Petroleum Engineers, the Society of Petroleum Evaluation Engineers and the Society of Professional Well Log Analysts. 6. That I have in excess of forty years experience in the evaluation of oil and gas properties in the United States, Canada, Mexico, South America and Germany, and that I have been practicing as a consultant in petroleum engineering and geology since 1985. RALPH E. DAVIS ASSOCIATES, INC. /S/ Larry A. Barnett ---------------------------- Larry A. Barnett, P. E. Senior Vice-President ATTACHMENT A NORTH EUROPEAN OIL ROYALTY TRUST RESERVE SUMMARY AND FIVE YEAR NET SALES HISTORY ESTIMATED NET PROVED PRODUCING RESERVES - --------------------------------------- AS OF OCTOBER 1, 2001 - --------------------- OLDENBURG - --------------------------------------------------------------------------- Oil/Cond. Oil Well Gas Well Sulfur Gas Gas Barrels MMcf MMcf Short Tons --------- ---------- ---------- ---------- 76,784 31 50,683 56,434*** ***Note: At current prices, no royalties are presently being paid under the Mobil Erdgas sulfur royalty. FIVE YEAR NET SALES SUMMARY - --------------------------- 12 MONTHS ENDING SEPTEMBER 30 - ----------------------------- OLDENBURG - --------------------------------------------------------------------------- Oil/Cond. Oil Well Gas Well Sulfur Gas Gas Barrels MMcf MMcf Short Tons ---------- ---------- ---------- ------------ 2001 7,205 7 5,159 4,667*** 2000 6,996 7 4,953 4,373*** 1999 7,415 8 5,047 3,744*** 1998 8,236 9 4,937 4,334*** 1997 9,618 7 4,479 3,993*** ***Note: At current prices, no royalties are presently being paid under the Mobil Erdgas sulfur royalty. ATTACHMENT B NORTH EUROPEAN OIL ROYALTY TRUST CALCULATION OF COST DEPLETION PERCENTAGE For the Year Ending December 31, 2001 OLDENBURG Oil Well Gas Well Oil Gas Gas Barrels MMCF MMCF ------- ---------- ---------- NEORT NET RESERVES (Barrels of Oil and Million Cubic Feet of Gas) - ------------------------------------------------------------------ 1. Estimated remaining net proved producing reserves as of 10-1-00 62,458 38 53,260 2. Adjustments to reserves during period 21,621 0 2,582 3. Adjusted est. net proved producing reserves as of 10-1-00 84,079 38 55,842 4. Net sales from 10-1-00 to 9-30-01 7,205 7 5,159 5. Estimated remaining net proved producing reserves as of 10-1-01 76,874 31 50,683 RESERVE DEPLETION FACTOR - ----------------------------- 6. Depletion factor 0.08569 0.18421 0.09239 NEORT WEIGHTED PRODUCT BASE ALLOCATION - ------------------------------------------- 7. Product base as of 1-1-00 0.40628 0.03137 11.63541 8. Less adjustments taken during 2000 0.04092 0.00488 0.98999 9. Product base as of 1-1-01 0.36536 0.02649 10.64542 10. 2001 adjustment to product base 0.03131 0.00488 0.98348 11. Cost depletion percentage for 2001 calendar year for Trust unit owners is equal to 9.2385 percent of their 1-1-01 cost base. Footnotes: Line (1) from reserves review as of 10-1-00 Line (2) from reserves review as of 10-1-01 Line (3) = Line (1) + Line (2) Line (4) from OEG and Mobil Erdgas statements Line (5) from reserves review as of 10-1-01 Line (6) = Line (4) / Line (3) Line (7) from 2000 Depletion Computations Line (8) from 2000 Depletion Computations Line (9) = Line (7) - Line (8) Line (10) = Line (9) x Line (6) Line (11) = [Sum (10)] / [Sum (9)] -----END PRIVACY-ENHANCED MESSAGE-----