------------------
FIRST CLASS
US POSTAGE
PAID
Permit No. 1
Houston, Texas
LL&E ROYALTY TRUST ------------------
P.O. BOX 4717
HOUSTON, TEXAS 77210-4717
LL&E ROYALTY
TRUST
2002
FIRST QUARTER REPORT TO
UNIT HOLDERS
QUARTER ENDED MARCH 31, 2002
JPMORGAN CHASE BANK FORMERLY KNOWN
AS
THE CHASE MANHATTAN BANK, 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2002.
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)
<Table>
TEXAS 76-6007940
(State or other jurisdiction of (I.R.S. Employer
incorporation Identification No.)
or organization)
JPMORGAN CHASE BANK, TRUSTEE 77002
CORPORATE TRUST DIVISION (Zip Code)
712 MAIN STREET
HOUSTON, TEXAS
(Address of principal executive offices)
</Table>
Registrant's telephone number, including area code: (800) 852-1422
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 14, 2002, 18,991,304 Units of Beneficial Interest in the registrant
were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<Table>
<Caption>
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 Accountants' Review Report................. 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................. 15
Signature................................................... 16
</Table>
-1-
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
accounting principles generally accepted in the United States of America. 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, 2001. The cash earnings and
distributions for the three months ended March 31, 2002 are not necessarily
indicative of the results to be expected for the year 2002.
The March 31, 2002 and 2001 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 is included herein.
-2-
LL&E ROYALTY TRUST
STATEMENTS OF CASH EARNINGS AND DISTRIBUTIONS
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2002 2001
----------- -----------
Royalty revenues............................................ $ 900,619 $ 4,159,672
Trust administrative expenses............................... (146,484) (161,175)
----------- -----------
Cash earnings............................................... 754,135 3,998,497
Changes in undistributed cash............................... 12,960 22,019
----------- -----------
Cash distributions.......................................... $ 767,095 $ 4,020,516
=========== ===========
Cash distributions per Unit................................. $ .0404 $ .2117
=========== ===========
Units outstanding........................................... 18,991,304 18,991,304
=========== ===========
</Table>
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
(UNAUDITED)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
ASSETS
Cash........................................................ $ 21,275 $ 34,235
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)...................... (74,204,000) (74,168,000)
------------ ------------
Total assets...................................... $ 2,099,275 $ 2,148,235
============ ============
LIABILITIES AND TRUST CORPUS
Trust Corpus (18,991,304 Units of Beneficial Interest
authorized, issued and outstanding)....................... $ 2,099,275 $ 2,148,235
Contingencies (note 6)......................................
------------ ------------
Total liabilities and Trust Corpus................ $ 2,099,275 $ 2,148,235
============ ============
</Table>
STATEMENTS OF CHANGES IN TRUST CORPUS
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
---------- -----------
Trust Corpus, beginning of period (note 3).................. $2,148,235 $ 2,382,160
Cash earnings............................................... 754,135 3,998,497
Cash distributions.......................................... (767,095) (4,020,516)
Amortization of royalty interest (note 3)................... (36,000) (39,000)
---------- -----------
Trust Corpus, end of period................................. $2,099,275 $ 2,321,141
========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
-3-
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(1) FORMATION OF THE TRUST
On June 28, 1983, The Louisiana Land and Exploration Company (herein
Working Interest Owner or Company) created the LL&E Royalty Trust (the "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 has 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 JPMorgan Chase Bank (the Trustee) formerly known
as The Chase Manhattan Bank successor by merger to 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 are computed on a Property-by-Property basis and 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
-4-
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2002
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.
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, 2002, the Fee Lands consisted of approximately 32,000
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, 2002, 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 accounting principles generally accepted in the United States of
America, 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
-5-
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2002
financial statements and notes thereto included in the Trust's Annual Report on
Form 10-K for the year ended December 31, 2001.
(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 requested ruling (d) that the Company did not
recognize gain or loss upon the transfer of the Royalties to the Trust or upon
distribution of the Units to its stockholders because the IRS proposed to rule
that the transfer and distribution resulted in the recapture of ordinary income
attributable to intangible drilling and development costs under Section 1254 of
the Code (IDC Recapture Income). Counsel for the Company expressed no opinion on
this issue. The Company and the IRS subsequently litigated the issue, and in
1989 the Tax Court rendered an opinion favorable to the Company. The Tax Court
held that the Company's transfer of the Royalties to the Trust and its
distribution of the Units to its stockholders did not constitute a disposition
of "oil, gas, or geothermal property" within the meaning of Section 1254 of the
Code. Consequently the Company was not required to recognize IDC Recapture
Income on the disposition of the Royalties. The opinion of the Tax Court has
become final and nonappealable.
-6-
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2002
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 COSTS
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 (the "Special
Costs"). According to the most recent reserve report, included in the Trust's
Annual Report and Form 10-K for the year ended December 31, 2001, the total
future dismantlement costs to the Working Interest Owner are estimated to be
$8,800,000 for Jay Field, $2,400,000 for South Pass 89, and $2,300,000 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 February 2000, the Working Interest Owner informed the Trustee that it
had elected at that time not to escrow any additional funds from the Productive
Properties to provide for the Trust's portion of estimated dismantlement costs
effective with the April 2000 royalty distribution.
The cumulative escrow balance as of March 31, 2002 was $4,543,402 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, 2002, 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
Conveyances prohibit the Working Interest Owner from escrowing additional funds
for estimated future Special Costs with respect to a particular Productive
Property once the amount escrowed exceeds 125% of the aggregate estimated future
Special Costs for that Property. The Conveyances permit the Working Interest
Owner to release funds from any of the Special Costs escrows at any time if it
determines in its sole discretion that there no longer exists a need for
escrowing all or any portion of such funds. However, the Working Interest Owner
is not required to do so. The Working Interest Owner has informed the Trustee
that it does not intend to release any of the excess escrowed funds at this
time.
The Working Interest Owner has advised the Trustee 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.
-7-
LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2002
(6) CONTINGENCY
The Trustee has been informed by the Working Interest Owner that the
Working Interest Owner has been named as one of many defendants in certain
lawsuits alleging the underpayment of royalties on the production of natural gas
and natural gas liquids through the use of below-market prices, improper
deductions, improper measurement techniques and transactions with affiliated
companies. Plaintiffs in some of the lawsuits allege that the underpayment of
royalties, among other things, resulted in false forms being filed by the
Working Interest Owner with the Minerals Management Service, thereby violating
the civil False Claims Act.
If the plaintiffs are successful in the matters described above, revenues
to the Trust could decrease. A judgment or settlement could entitle the Working
Interest Owner to reimbursements for past periods attributable to properties
covered by the Trust's interest, which could decrease future royalty payments to
the Trust. The Working Interest Owner has informed the Trustee that at this
time, the Working Interest Owner is not able to reasonably estimate the amount
of any potential loss or settlement allocable to the Trust's interest.
-8-
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
JPMorgan Chase Bank, 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, 2002, and the related
statements of cash earnings and distributions and changes in Trust corpus for
the three-month periods ended March 31, 2002 and 2001. 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 auditing standards generally accepted in the United States of
America, 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 accounting principles generally accepted in the
United States of America.
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, 2001, 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 8, 2002, 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
April 26, 2002
-9-
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 fact 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 Owner has advised the Trust that it believes 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, 2001, the total future dismantlement costs to
the Working Interest Owner are estimated to be $8,800,000 for the Jay Field
property, $2,400,000 for the South Pass 89 property, and $2,300,000 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 February 2000, the Working Interest Owner informed the Trustee that it
had elected at that time not to escrow any additional funds from the Productive
Properties to provide for the Trust's portion of estimated dismantlement costs
effective with the April 2000 royalty distribution.
The cumulative escrow balance as of March 31, 2002 was $4,543,402 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, 2002, the
cumulative escrow balance for the Offshore Louisiana property was $3,000,000,
90%
-10-
of which would otherwise have been distributable to the Trust. The Conveyances
prohibit the Working Interest Owner from escrowing additional funds for
estimated future Special Costs with respect to a particular Productive Property
once the amount escrowed exceeds 125% of the aggregate estimated future Special
Costs for that Property. The Conveyances permit the Working Interest Owner to
release funds from any of the Special Costs escrows at any time if it determines
in its sole discretion that there no longer exists a need for escrowing all or
any portion of such funds. However, the Working Interest Owner is not required
to do so. The Working Interest Owner has informed the Trustee that it does not
intend to release any of the excess escrowed funds at this time.
The Working Interest Owner has advised the Trustee 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.
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, 2002 and 2001 (the 2002
and 2001 "First Quarters", respectively) are attributable to the Working
Interest Owner's operations during the periods October through December of 2001
(the "Current Operating Period") and October through December of 2000 (the
"Prior Year's Operating Period"), respectively.
Distributions to Unit holders for the 2002 and 2001 First Quarters amounted
to $767,095 ($.0404 per Unit) and $4,020,516 ($.2117 per Unit), respectively.
During these periods, the Trust received cash of $900,619 and $4,159,672,
respectively, from the Working Interest Owner with respect to the Royalties from
the Properties.
The Trustee has been informed by the Working Interest Owner that gross
revenues included in the March 2002 distribution associated with South Pass 89
were overstated by approximately $255,000. The overstatement of revenues, after
applying the 50% royalty interest, is approximately $127,500. An adjustment will
be made in June 2002 resulting in a reduction of approximately $127,500 to the
June 2002 distribution.
The monthly per Unit distributions during the 2002 and 2001 First Quarters
were as follows:
<Table>
<Caption>
2002 2001
------ ------
January.................................................. $.0228 $.0628
February................................................. .0072 .0626
March.................................................... .0104 .0863
------ ------
$.0404 $.2117
====== ======
</Table>
-11-
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 2002 and 2001:
FIRST QUARTER 2002
<Table>
<Caption>
SOUTH OFFSHORE
JAY FIELD PASS 89 LOUISIANA TOTAL
----------- ---------- ----------- -----------
Revenues:
Liquids................................ $ 5,276,722 $ 888,208 $ 86,545 $ 6,251,475
Natural gas............................ 28,540 328,677 790,527 1,147,744
----------- ---------- ----------- -----------
$ 5,305,262 $1,216,885 $ 877,072 $ 7,399,219
Production costs and expenses(1)......... (3,415,042) (168,697) (352,857) (3,936,596)
Capital expenditures..................... (3,158,386) (56,571) (1,416,893) (4,631,850)
----------- ---------- ----------- -----------
Net Proceeds............................. $(1,268,166) $ 991,617 $ (892,678) $(1,169,227)
=========== ========== =========== ===========
Overriding Royalties paid to the
Trust(2)............................... $ 450,771 $ 495,808 -- $ 946,579
=========== ========== =========== ===========
Fee Lands Royalties.............................................................. (45,960)
-----------
Royalties paid to the Trust...................................................... $ 900,619
===========
</Table>
- ---------------
(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 2002 First Quarter was $100,623. 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 the Net Proceeds.
-12-
FIRST QUARTER 2001
<Table>
<Caption>
SOUTH OFFSHORE
JAY FIELD PASS 89 LOUISIANA TOTAL
----------- ---------- ----------- -----------
Revenues:
Liquids................................ $ 7,775,478 $1,288,421 $ 287,924 $ 9,351,823
Natural gas............................ 421,387 928,679 1,625,948 2,976,014
----------- ---------- ----------- -----------
$ 8,196,865 $2,217,100 $ 1,913,872 $12,327,837
Production costs and expenses(1)......... (2,762,254) 162,882 (230,665) (2,830,037)
Capital expenditures..................... (1,246,336) -- (446,713) (1,693,049)
----------- ---------- ----------- -----------
Net Proceeds............................. $ 4,188,275 $2,379,982 $ 1,236,494 $ 7,804,751
=========== ========== =========== ===========
Overriding Royalties paid to the
Trust(2)............................... $ 2,094,138 $1,189,991 $ 824,096 $ 4,108,225
=========== ========== ===========
Fee Lands Royalties.............................................................. 51,447
-----------
Royalties paid to the Trust...................................................... $ 4,159,672
===========
</Table>
- ---------------
(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 2001 First Quarter was $191,041. 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 the Net Proceeds.
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 2002 and 2001:
<Table>
<Caption>
FIRST QUARTER
----------------------------
2002 2001
----------- -----------
Net Proceeds:
Revenues.................................................. $ 7,399,219 $12,327,837
Production costs and expenses............................. (3,936,596) (2,830,037)
Capital expenditures...................................... (4,631,850) (1,693,049)
----------- -----------
Net Proceeds.............................................. $(1,169,227) $ 7,804,751
=========== ===========
Royalties paid to the Trust:
Overriding Royalties...................................... $ 946,579 $ 4,108,225
Fee Lands Royalties....................................... (45,960) 51,447
----------- -----------
Royalties paid to the Trust............................... $ 900,619 $ 4,159,672
=========== ===========
</Table>
-13-
Revenues of the Working Interest Owner with respect to the Productive
Properties in the Current Operating Period decreased 40% from the Prior Year's
Operating Period primarily as a result of lower 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 $22.72 per barrel, $16.66 per barrel and $2.34 per thousand cubic feet
("mcf"), respectively. In the comparable 2001 period average crude oil, natural
gas liquids and natural gas prices were $30.53 per barrel, $27.25 per barrel and
$6.07 per mcf, respectively.
Production costs and expenses incurred by the Working Interest Owner on the
Productive Properties in the Current Operating Period increased 39% primarily as
a result of higher lease operating expenses. The increase in lease operating
expenses is primarily due to an increase in workover expense at the South Pass
89 property, and the Jay Field property, lower credits for third party
processing at the South Pass 89 property, and increased insurance costs for the
productive properties.
Capital expenditures increased 174% in the Current Operating Period
compared to the same period in 2001. Capital expenditures increased primarily
due to higher costs at the Offshore Louisiana and Jay Field properties. The Jay
Field excess production costs are primarily the result of higher capital
expenditures associated with drilling costs related to the McDavid Lands 37-5
well and higher costs associated with tubing upsize projects and nitrogen
purchases. The Offshore Louisiana excess production costs are primarily due to
capital expenditures related to the drilling and completion of a new well at
South Marsh Island 76.
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 32,123
barrels for the Current Operating Period and 90,228 for the Prior Year's
Operating Period. Imputed natural gas production was 51,954 thousand cubic feet
and 204,464 thousand cubic feet for the respective periods. The decrease in the
imputed production amounts are the result of the excess production costs.
At March 31, 2002, the Fee Lands consisted of approximately 32,000 gross
acres in South Louisiana, approximately 3,849 of which were under lease.
-14-
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<Table>
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.
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.
</Table>
- ---------------
* 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).
-15-
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: JPMORGAN CHASE BANK
Trustee
By: /s/ PETE FOSTER
----------------------------------
Pete Foster
Senior Vice President and Trust
Officer
Date: May 14, 2002
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.
-16-
INDEX TO EXHIBITS
<Table>
<Caption>
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.
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.
</Table>
- ---------------
* 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).