1
LL&E ROYALTY
TRUST
2000
FIRST QUARTER REPORT TO
UNIT HOLDERS
QUARTER ENDED MARCH 31, 2000
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION AS TRUSTEE FOR LL&E
ROYALTY TRUST, HAS ESTABLISHED
THE FOLLOWING TOLL FREE
INFORMATION LINE FOR UNIT HOLDER
INQUIRIES:
1-800-852-1422
AND AN INTERNET NEWS SOURCE WHICH
MAY BE ACCESSED AT:
WWW.BUSINESSWIRE.COM/CNN/LRT.HTM
2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8518
LL&E ROYALTY TRUST
(Exact name of registrant as specified in its charter)
TEXAS 76-6007940
(State or other jurisdiction of (I.R.S. Employer
incorporation Identification No.)
or organization)
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION 77002
CORPORATE TRUST DIVISION (Zip Code)
712 MAIN STREET
HOUSTON, TEXAS
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 216-5447
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 ______
At May 10, 2000, 18,991,304 Units of Beneficial Interest in the registrant
were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
TABLE OF CONTENTS
PAGE
----
Part I. Financial Information
Item 1. Financial Statements:
Presentation of Financial Information.................. 2
Statements of Cash Earnings and Distributions.......... 3
Statements of Assets, Liabilities and Trust Corpus..... 3
Statements of Changes in Trust Corpus.................. 3
Notes to Financial Statements.......................... 4
Independent Auditors' Review Report.................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................. 13
Signature................................................... 14
-1-
4
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LL&E ROYALTY TRUST
PRESENTATION OF FINANCIAL INFORMATION
The accompanying unaudited financial statements of LL&E Royalty Trust
(Trust) have been prepared in accordance with the instructions to Form 10-Q. The
financial statements were prepared on the basis of cash receipts and
disbursements and are not intended to be a presentation in conformity with
generally accepted accounting principles. The information reflects all
adjustments which, in the opinion of the Trustee, are necessary for a fair
presentation of the results for the interim periods presented. The financial
information should be read in conjunction with the financial statements and
notes thereto included in the Trust's Annual Report on Form 10-K for the year
ended December 31, 1999. The cash earnings and distributions for the three
months ended March 31, 2000 are not necessarily indicative of the results to be
expected for the year 2000.
The March 31, 2000 and 1999 financial statements included in this filing on
Form 10-Q have been reviewed by KPMG LLP, independent auditors, in accordance
with established professional standards and procedures for such a review. The
report of KPMG LLP commenting upon their review is included herein.
-2-
5
LL&E ROYALTY TRUST
STATEMENTS OF CASH EARNINGS AND DISTRIBUTIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
------------ -----------
Royalty revenues............................................ $ 1,812,367 $ 911,912
Trust administrative expenses............................... (123,611) (153,165)
------------ -----------
Cash earnings............................................... 1,688,756 758,747
Changes in undistributed cash............................... (15,563) 18,496
------------ -----------
Cash distributions.......................................... $ 1,673,193 $ 777,243
============ ===========
Cash distributions per Unit................................. $ .0881 $ .0409
============ ===========
Units outstanding........................................... 18,991,304 18,991,304
============ ===========
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Cash........................................................ $ 33,364 $ 17,801
Net overriding royalty interests in productive oil and gas
properties and 3% royalty interests in fee lands (notes 2,
3 and 5).................................................. 76,282,000 76,282,000
Less accumulated amortization (note 3)...................... (73,829,000) (73,793,000)
------------ ------------
Total assets...................................... $ 2,486,364 $ 2,506,801
============ ============
LIABILITIES AND TRUST CORPUS
Trust Corpus (18,991,304 Units of Beneficial Interest
authorized, issued and outstanding)....................... $ 2,486,364 $ 2,506,801
Contingencies (notes 4 and 6)
------------ ------------
Total liabilities and Trust Corpus................ $ 2,486,364 $ 2,506,801
============ ============
STATEMENTS OF CHANGES IN TRUST CORPUS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
----------- -----------
Trust Corpus, beginning of period (note 3).................. $ 2,506,801 $ 2,584,963
Cash earnings............................................... 1,688,756 758,747
Cash distributions.......................................... (1,673,193) (777,243)
Amortization of royalty interest (note 3)................... (36,000) (147,000)
----------- -----------
Trust Corpus, end of period................................. $ 2,486,364 $ 2,419,467
=========== ===========
The accompanying notes are an integral part of these financial statements.
-3-
6
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(1) FORMATION OF THE TRUST
On June 28, 1983, The Louisiana Land and Exploration Company (herein
Working Interest Owner or Company) created LL&E Royalty Trust (Trust) and
distributed Units of Beneficial Interest (Units) in the Trust to the holders of
record of capital stock of the Company on the basis of one Unit for each two
shares of capital stock held on June 22, 1983. On October 22, 1997, the
shareholders of the Company approved a definitive agreement to merge with
Burlington Resources Inc. ("BR"). Effective on that date, the Company became a
wholly owned subsidiary of BR. The merger had no significant effects on the
Trust.
Upon creation of the Trust, the Company conveyed to the Trust (a) net
overriding royalty interests (Overriding Royalties), which are equivalent to net
profits interests, in certain productive oil and gas properties located in
Alabama, Florida, Texas and in federal waters offshore Louisiana (Productive
Properties) and (b) 3% royalty interests (Fee Lands Royalties) in certain of the
Company's then unleased, undeveloped south Louisiana fee lands (Fee Lands). The
Overriding Royalties and the Fee Lands Royalties are referred to collectively as
the "Royalties". Title to the Royalties is held by a partnership (Partnership)
of which the Trust and the Company are the only partners, holding 99% and 1%
interests, respectively.
The Trust is passive, with Chase Bank of Texas National Association as
Trustee, having only such powers as are necessary for the collection and
distribution of revenues resulting from the Royalties, the payment of Trust
liabilities and the conservation and protection of the Trust estate. The Units
are listed on the New York Stock Exchange (NYSE Symbol: LRT).
(2) NET OVERRIDING ROYALTY INTERESTS AND FEE LANDS ROYALTIES
The instruments conveying the Overriding Royalties generally provide that
the Working Interest Owner or any successor working interest owner will
calculate and pay to the Trust each month an amount equal to various percentages
of the Net Proceeds (as defined in the Conveyance of Overriding Royalty
Interests) from the Productive Properties. For purposes of computing Net
Proceeds, the Productive Properties have been grouped geographically into three
groups of leases, each of which has been defined as a separate "Property".
Generally, Net Proceeds will be computed on a Property-by-Property basis and
will consist of the aggregate proceeds to the Working Interest Owner or any
successor working interest owner from the sale of oil, gas and other
hydrocarbons from each of the Productive Properties less: (a) all direct costs,
charges, and expenses incurred by the Working Interest Owner in exploration,
production, development and other operations on the Productive Properties
(including secondary and tertiary recovery operations), including abandonment
costs; (b) all applicable taxes, including severance and ad valorem taxes, but
excluding income taxes except as described in note 4 below; (c) all operating
charges directly associated with the Productive Properties; (d) an allowance for
costs if costs and expenses for any Productive Property have exceeded proceeds
of production from such Productive Property in a preceding month; and (e)
charges for certain overhead expenses.
-4-
7
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
The Fee Lands Royalties consist of royalty interests equal to a 3% interest
in the future gross oil, gas, and other hydrocarbon production, if any, from
each of the Fee Lands, unburdened by the expense of drilling, completion,
development, operating and other costs incident to production. In June 1993,
pursuant to applicable law, the Fee Lands Royalties terminated as to all tracts
not then held by production or maintained by production from other tracts.
Consequently, at March 31, 2000, the Fee Lands consisted of approximately 35,000
gross acres.
(3) BASIS OF PRESENTATION
The financial statements of the Trust are prepared on the following basis:
(a) Royalties are recorded on a cash basis and are generally received
by the Trustee in the third month following the month of production of oil
and gas attributable to the Trust's interest.
(b) Trust expenses, which include accounting, engineering, legal and
other professional fees, Trustee's fees and out-of-pocket expenses, are
recorded on a cash basis.
(c) Amortization of the net overriding royalty interests in productive
oil and gas properties and the 3% royalty interest in Fee Lands, which is
calculated on a unit-of-production basis, is charged directly to the Trust
corpus since the amount does not affect cash earnings.
(d) The initial carrying value of the Trust's royalty interests in oil
and gas properties represents the Company's cost on a successful efforts
basis (net of accumulated depreciation, depletion and amortization) at June
28, 1983 applicable to the interest in the properties transferred to the
Trust. Information regarding the calculation of the amount of such cost was
supplied by the Company to the Trustee. The unamortized balance at March
31, 2000, is not necessarily indicative of the fair market value of the
interests held by the Trust.
The preparation of the financial statements requires estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
While these statements differ from financial statements prepared in
accordance with generally accepted accounting principles, the cash basis of
reporting revenues and expenses is considered to be the most meaningful because
monthly distributions to the Unit holders are based on net cash receipts. The
financial information furnished herein should be read in conjunction with the
financial statements and notes thereto included in the Trust's Annual Report on
Form 10-K for the year ended December 31, 1999.
-5-
8
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(4) FEDERAL INCOME TAX MATTERS
In May and June 1983, the Company applied to the Internal Revenue Service
(IRS) for certain rulings, including the following: (a) the Trust will be
classified for federal income tax purposes as a trust and not as an association
taxable as a corporation, (b) the Trust would be characterized as a "grantor"
trust as to the Unit holders and not as a "simple" or "complex" trust (a
"non-grantor" trust), (c) the Partnership will be classified as a partnership
and not as an association taxable as a corporation, (d) the Company will not
recognize gain or loss upon the transfer of the Royalties to the Trust or upon
the distribution of the Units to its stockholders, (e) each Royalty would be
considered an economic interest in oil and gas in place, and each Overriding
Royalty would constitute a single property within the meaning of Section 614(a)
of the Internal Revenue Code, (f) the steps taken to create the Trust and the
Partnership and to distribute the Units will be viewed for federal income tax
purposes as a distribution of the Royalties by the Company to its stockholders,
followed by the contribution of the Royalties by the stockholders to the
Partnership in exchange for interests therein, which in turn was followed by the
contribution by the stockholders of the interests in the Partnership to the
Trust in exchange for Units, and (g) the transfer of a Unit of the Trust will be
considered for federal income tax purposes to be the transfer of the
proportionate part of the Partnership interest attributable to such Unit.
Subsequent to the distribution of the Units, the IRS ruled favorably on all
requested rulings except (d). Because the rulings were issued after the
distribution of the Units, however, the rulings could be revoked by the IRS if
it changes its position on the matters they address. If the IRS changed its
position on these issues, challenged the Trust and the Unit holders and was
successful, the result could be adverse. The Company withdrew its request for
the ruling described in (d), and the Company and the IRS subsequently litigated
the issue. The Tax Court rendered an opinion favorable to the Company, which
became final in 1992.
These financial statements are prepared on the basis that the Trust will be
treated as a "grantor" trust and that the Partnership will be treated as a
partnership for federal income tax purposes. Accordingly, no income taxes are
provided in the financial statements.
(5) DISMANTLEMENT OF PLATFORMS
The Working Interest Owner, under the terms of the Trust Conveyances is
permitted to escrow funds from the Productive Properties for estimated future
costs such as dismantlement costs and capital expenditures. According to the
most recent reserve report, included in the Trust's Annual Report and Form 10-K
for the year ended December 31, 1999, the total future dismantlement costs to
the Working Interest Owner are $9,600,000 for Jay Field, $2,600,000 for South
Pass 89, and $3,000,000 for the Offshore Louisiana property. The Trust's
interests in these properties are equivalent to 50% of the net proceeds from Jay
Field and South Pass 89 properties and 90% of the net proceeds from the Offshore
Louisiana property.
-6-
9
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
In June 1999, the Working Interest Owner informed the Trustee that, in
accordance with its contractual rights, it would escrow funds from the
Productive Properties to provide for the Trust's portion of the estimated costs
of dismantling platforms effective with the July 1999 royalty distribution.
The cumulative escrow balance as of March 31, 2000 was approximately
$4,543,000 for the Jay Field property and $2,600,000 for the South Pass 89
property, 50% of which would otherwise have been distributable to the Trust. At
March 31, 2000, the cumulative escrow balance for the Offshore Louisiana
property was $3,000,000, 90% of which would otherwise have been distributable to
the Trust.
The Working Interest Owner has advised the Trustee that under the terms of
the conveyances it is permitted to escrow funds from all of the Productive
Properties and that it intends to continue monitoring its estimates of relevant
factors in order to evaluate the necessity of escrowing funds on an ongoing
basis. The Working Interest Owner is under no obligation to give any advance
notice to the Trustee or the Unit holders in the event it determines that
additional funds should be escrowed. If the Working Interest Owner begins to
escrow additional funds, the Royalties paid to the Trust would be reduced, and
the reductions could be significant.
(6) CONTINGENCY
In September 1999, Florida's Department of Revenue ("FDR") issued two
Notices of Intent to Make Audit Changes claiming that the Company underpaid
severance taxes on crude oil production from the Jay Field between January 1,
1993 and December 31, 1997. The Company valued crude oil on the basis of sales
at posted prices in the area. The FDR asserts that posted prices do not reflect
the true market value of the production and has recalculated taxes using the
value of refined products attributable to Jay Field crude oil. Additionally,
certain treating deductions have been disallowed. The total deficiency alleged
(inclusive of penalties and interest through September 13, 1999) amounts to
approximately $5 million of which approximately $3.4 million is applicable to
the Trust. The Company contends that the applicable posted prices are both an
accurate measure of the fair market value of this crude in the field and are in
compliance with Florida's statutory requirements relative to crude oil valuation
for severance tax purposes. The Company has informed the Trustee that it also
believes the subject treating charge deductions were proper.
-7-
10
INDEPENDENT AUDITORS' REVIEW REPORT
Chase Bank of Texas, National Association, Trustee
and the Unit Holders of LL&E Royalty Trust:
We have reviewed the accompanying statement of assets, liabilities and
Trust corpus of LL&E Royalty Trust (Trust) as of March 31, 2000, and the related
statements of cash earnings and distributions and changes in Trust corpus for
the three-month periods ended March 31, 2000 and 1999. These financial
statements are the responsibility of the Trustee.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
As described in Note 3, these financial statements were prepared on the
basis of cash receipts and disbursements and are not intended to be a
presentation in conformity with generally accepted accounting principles.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with the basis of accounting as described in Note 3.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and Trust corpus as of December
31, 1999, and the related statements of cash earnings and distributions and
changes in Trust corpus for the year then ended (not presented herein), and in
our report dated March 20, 2000, we expressed an unqualified opinion on those
financial statements which were prepared on the basis of accounting described in
Note 3.
KPMG LLP
Dallas, Texas
May 10, 2000
-8-
11
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-Q, including without
limitation the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations", are forward-looking statements.
Although the Working Interest Owners have advised the Trust that they believe
that the expectations reflected in the forward-looking statements contained
herein are reasonable, no assurance can be given that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from expectations ("Cautionary Statements") are disclosed in
this Form 10-Q and in the Trust's Form 10-K, including without limitation in
conjunction with the forward-looking statements included in this Form 10-Q. All
subsequent written and oral forward-looking statements attributable to the Trust
or persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
The unaudited data included in the financial statements and notes thereto
in Item 1 are an integral part of this discussion and analysis and should be
read in conjunction herewith. The information contained herein regarding
operations and exploration and development activities on the properties burdened
by the Royalties, and certain other matters, has been furnished by the Working
Interest Owner.
LIQUIDITY AND CAPITAL RESOURCES
As stipulated in the Trust Agreement, the Trust is intended to be passive,
and the Trustee's activities are limited to the receipt of revenues attributable
to the Royalties, which revenues are to be distributed currently (after payment
of or provision for Trust expenses and liabilities) to the owners of the Units.
The Trust has no source of liquidity or capital resources other than the
revenue, if any, attributable to the Royalties.
The Working Interest Owner, under the terms of the Trust Conveyances is
permitted to escrow funds from the Productive Properties for estimated future
costs such as dismantlement costs and capital expenditures. According to the
most recent reserve report, included in the Trust's Annual Report and Form 10-K
for the year ended December 31, 1999 the total future dismantlement costs to the
Working Interest Owner are $9,600,000 for Jay Field, $2,600,000 for South Pass
89, and $3,000,000 for the Offshore Louisiana property. The Trust's interests in
these properties are equivalent to 50% of the net proceeds from Jay Field and
South Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana
property.
In June 1999, the Working Interest Owner informed the Trustee that, in
accordance with its contractual rights, it would escrow funds from the
Productive Properties to provide for the Trust's portion of the estimated costs
of dismantling platforms effective with the July 1999 royalty distribution.
The cumulative escrow balance as of March 31, 2000 was approximately
$4,543,000 for the Jay Field property and $2,600,000 for the South Pass 89
property, 50% of which would otherwise have been distributable to the Trust. At
March 31, 2000, the cumulative escrow balance for the Offshore Louisiana
property was $3,000,000, 90% of which would otherwise have been distributable to
the Trust.
-9-
12
RESULTS OF OPERATIONS
Revenues are generally received in the third month following the month of
production of oil and gas attributable to the Trust's interest. Both revenues
and Trust expenses are recorded on a cash basis. Accordingly, distributions to
Unit holders for the three-month periods ended March 31, 2000 and 1999 (the 2000
and 1999 "First Quarters", respectively) are attributable to the Working
Interest Owner's operations during the periods October through December of 1999
(the "Current Operating Period") and October through December of 1998 (the
"Prior Year's Operating Period"), respectively.
Distributions to Unit holders for the 2000 and 1999 First Quarters amounted
to $1,673,193 ($.0881 per Unit) and $777,243 ($.0409 per Unit), respectively.
During these periods, the Trust received cash of $1,812,367 and $911,912,
respectively, from the Working Interest Owner with respect to the Royalties from
the Properties.
The monthly per Unit distributions during the 2000 and 1999 First Quarters
were as follows:
2000 1999
-------- --------
January............................................... $ .0282 $ .0145
February.............................................. .0263 .0181
March................................................. .0336 .0083
------- -------
$ .0881 $ .0409
======= =======
The following unaudited schedules provide summaries of the Working Interest
Owner's calculation of the Net Proceeds from the Properties and the Royalties
paid to the Trust for the First Quarters of 2000 and 1999:
FIRST QUARTER 2000
SOUTH OFFSHORE
JAY FIELD PASS 89 LOUISIANA TOTAL
----------- ---------- ---------- -----------
Revenues:
Liquids................................. $ 6,649,396 $1,386,040 $ 326,566 $ 8,362,002
Natural gas............................. 126,017 261,362 880,183 1,267,562
Special Cost Escrow(1).................. (1,937,768) -- -- (1,937,768)
----------- ---------- ---------- -----------
4,837,645 1,647,402 1,206,749 7,691,796
Production costs and expenses(2).......... (2,682,425) (304,844) (304,821) (3,292,090)
Capital expenditures...................... (1,268,953) (27,119) (95,989) (1,392,061)
----------- ---------- ---------- -----------
Net Proceeds.............................. $ 886,267 $1,315,439 $ 805,939 $ 3,007,645
=========== ========== ========== ===========
Overriding Royalties paid to the
Trust(3)................................ $ 443,134 $ 646,345 $ 662,868 $ 1,752,347
=========== ========== ==========
Fee Lands Royalties.............................................................. 60,020
-----------
Royalties paid to the Trust...................................................... $ 1,812,367
===========
- ---------------
(1) As more fully described in Note 5, the Working Interest Owner informed the
Trustee, that in accordance with its contractual rights, it would escrow
funds from the Productive Properties to provide for the Trust's
-10-
13
portion of estimated costs of dismantling platforms effective with the July
1999 royalty distribution. The cumulative escrow balance at March 31, 2000
was approximately $4,543,000 for the Jay Field property and $2,600,000 for
the South Pass 89 property, 50% of which would otherwise have been
distributable to the Trust. At March 31, 2000, the cumulative escrow balance
for the Offshore Louisiana property was $3,000,000, 90% of which would
otherwise have been distributable to the Trust.
(2) Interest earned on funds escrowed for estimated future dismantlement costs
are reported as a reduction of production costs and expenses. Interest
earned for the 2000 First Quarter was approximately $150,000. Pursuant to
the terms of the Trust Conveyances, interest earned on the escrowed funds
for any month will be calculated at an interest rate equal to 80% of the
median between the Prime Rate at the end of such month and the Prime Rate at
the end of the preceding month.
(3) As a result of excess production costs being incurred in one monthly
operating period and then being recovered in a subsequent monthly operating
period(s), the Overriding Royalties paid to the Trust may not agree to the
Trust's royalty interest in the Net Proceeds.
FIRST QUARTER 1999
SOUTH OFFSHORE
JAY FIELD PASS 89 LOUISIANA TOTAL
----------- ---------- --------- -----------
Revenues:
Liquids.................................. $ 3,372,872 $1,313,606 $ 106,637 $ 4,793,115
Natural gas.............................. 94,289 551,230 781,517 1,427,036
----------- ---------- --------- -----------
3,467,161 1,864,836 888,154 6,220,151
Production costs and expenses(1)........... (2,494,871) (269,268) (384,149) (3,148,288)
Capital expenditures....................... (885,809) (196,830) (322,144) (1,404,783)
----------- ---------- --------- -----------
Net Proceeds............................... $ 86,481 $1,398,738 $ 181,861 $ 1,667,080
=========== ========== ========= ===========
Overriding Royalties paid to the
Trust(2)................................. $ 191,768 $ 699,369 $ -- $ 891,137
=========== ========== =========
Fee Lands Royalties.............................................................. 20,775
-----------
Royalties paid to the Trust...................................................... $ 911,912
===========
- ------------
(1) Interest earned on funds escrowed for estimated future dismantlement costs
are reported as a reduction of production costs and expenses. Interest
earned for the 1999 First Quarter was approximately $54,000. Pursuant to the
terms of the Trust Conveyances, interest earned on the escrowed funds for
any month will be calculated at an interest rate equal to 80% of the median
between the Prime Rate at the end of such month and the Prime Rate at the
end of the preceding month.
(2) As a result of excess production costs being incurred in one monthly
operating period and then being recovered in a subsequent monthly operating
period(s), the overriding royalties paid to the Trust may not agree to the
Trust's royalty interest in Net Proceeds. As of March 31, 1999, excess
production costs to be recovered from future revenues total approximately
$297,000 at Jay Field and approximately $537,000 at Offshore Louisiana.
-11-
14
The following unaudited schedule summarizes the Working Interest Owner's
calculation of the Net Proceeds from the Properties and the Royalties paid to
the Trust for the First Quarters of 2000 and 1999:
FIRST QUARTER
-----------------------------
2000 1999
------------ -----------
Net Proceeds:
Revenues.................................................. $ 7,691,796(1) $ 6,220,151
Production costs and expenses............................. (3,292,090) (3,148,288)
Capital expenditures...................................... (1,392,061) (1,404,783)
------------ -----------
Net Proceeds.............................................. $ 3,007,645 $ 1,667,080
============ ===========
Royalties paid to the Trust:
Overriding Royalties...................................... $ 1,752,347 $ 891,137
Fee Lands Royalties....................................... 60,020 20,775
------------ -----------
Royalties paid to the Trust............................... $ 1,812,367 $ 911,912
============ ===========
- ------------
(1) Liquids and Natural Gas Revenues for the quarter ended March 31, 2000
($9,629,564) less Special Cost Escrow ($1,937,768).
Revenues of the Working Interest Owner with respect to the Productive
Properties in the Current Operating Period increased 24% (increased 55% if
Special Cost Escrow is not deducted from Revenues) from the Prior Year's
Operating Period primarily as a result of higher commodity prices. Average crude
oil, natural gas liquids and natural gas prices received by the Working Interest
Owner in the Current Operating Period attributable to the Productive Properties
were $23.09, $19.81 and $2.59, respectively. In the comparable 1999 period
average crude oil, natural gas liquids and natural gas prices were $11.67, $8.96
and $2.04, respectively.
Production costs and expenses incurred by the Working Interest Owner on the
Productive Properties in the Current Operating Period increased 5% primarily as
a result of an increase in lease operating expenses and production related taxes
at Jay Field.
Capital expenditures decreased marginally in the Current Operating Period.
Increased expenditures at Jay Field were offset primarily by decreased capital
expenditures at South Pass 89 and Offshore Louisiana.
Imputed production attributable to the Trust is calculated by multiplying
the gross production volumes attributable to the Productive Properties by the
ratio of the net overriding royalties paid to the Trust to the gross revenues
attributable to the Productive Properties. Imputed liquids production was 50,086
barrels for the Current Operating Period and 57,856 for the Prior Year's
Operating Period. Imputed natural gas production was 234,684 thousand cubic feet
and 100,374 thousand cubic feet for the respective periods.
As described in more detail in the Trust's Annual Report and Form 10-K for
the year ended December 31, 1999, under Louisiana law, mineral royalties
generally terminate, in the absence of production, after the lapse of ten
consecutive years from the date of conveyance. Consequently, substantially all
of the Trust's royalty interest in the original Fee Lands acreage terminated in
June 1993. The Trust never received
-12-
15
any revenues from the tracts as to which the Fee Lands Royalties terminated and
such termination did not affect tracts from which the Trust is receiving
revenues. However, the Trust will not be entitled to receive any revenues in the
future from the tracts as to which the Fee Lands Royalties terminated. At March
31, 2000, the Fee Lands consisted of approximately 35,000 gross acres in South
Louisiana, approximately 3,638 of which were under lease.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
4* -- Trust Agreement for LL&E Royalty Trust, dated as of June
1, 1983, between the Company and First City National Bank
of Houston, as Trustee.
27 -- Financial Data Schedule.
28.1* -- Agreement of General Partnership of LL&E Royalty
Partnership.
28.2* -- Form of Conveyance of Overriding Royalty Interests for
Fort Worth Basin Property.
28.3* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Alabama) Property.
28.4* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Florida) Property.
28.5* -- Form of Conveyance of Overriding Royalty Interests for
Offshore Louisiana Property.
28.6* -- Form of Conveyance of Overriding Royalty Interests for
South Pass 89 Property.
28.7* -- Form of Royalty Deed.
- ---------------
* Incorporated by reference to Exhibits of like designation to Registrant's
Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
File No. 1-8518).
-13-
16
SIGNATURE
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.
LL&E ROYALTY TRUST
(Registrant)
By: CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
Trustee
By: /s/ PETE FOSTER
----------------------------------
Pete Foster
Senior Vice President and Trust
Officer
Date: May 10, 2000
NOTE: Because the Registrant is a trust without officers or employees, only the
signature of an officer of the Trustee is available and has been provided.
-14-
17
INDEX TO EXHIBITS
EXHIBIT
NUMBER
-------
4* -- Trust Agreement for LL&E Royalty Trust, dated as of June
1, 1983, between the Company and First City National Bank
of Houston, as Trustee.
27 -- Financial Data Schedule
28.1* -- Agreement of General Partnership of LL&E Royalty
Partnership.
28.2* -- Form of Conveyance of Overriding Royalty Interests for
Fort Worth Basin Property.
28.3* -- Form of Conveyance of Overriding Royalty Interests for
Jay Field (Alabama) Property.
28.4* -- Form of Conveyance of Overriding Royalty Interests for
Interests for Jay Field (Florida) Property.
28.5* -- Form of Conveyance of Overriding Royalty Interests for
Offshore Louisiana Property
28.6* -- Form of Conveyance of Overriding Royalty Interests for
South Pass 89 Property.
28.7* -- Form of Royalty Deed.
- ---------------
* Incorporated by reference to Exhibits of like designation to Registrant's
Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
File No. 1-8518).