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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 JUNE 30, 1995.
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 incorporation (I.R.S. Employer
or organization) Identification No.)
TEXAS COMMERCE BANK 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) 216-6369
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 August 11, 1995, 18,991,304 Units of Beneficial Interest in the
registrant were outstanding.
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TABLE OF CONTENTS
PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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P A R T 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, 1994. The cash earnings and distributions for the six
months ended June 30, 1995 are not necessarily indicative of the results to be
expected for the year 1995.
The June 30, 1995 and 1994 financial statements included in this
filing on Form 10-Q have been reviewed by KPMG Peat Marwick LLP, independent
auditors, in accordance with established professional standards and procedures
for such a review. The report of KPMG Peat Marwick LLP commenting upon their
review is included herein.
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LL&E ROYALTY TRUST
STATEMENTS OF CASH EARNINGS AND DISTRIBUTIONS
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Royalty revenues . . . . . . . . . . $1,528,171 $2,276,744 $2,836,261 $4,484,019
Trust administrative expenses . . . . (183,083) (171,160) (358,590) (380,947)
---------- ---------- ---------- ----------
Cash earnings . . . . . . . . . . . . 1,345,088 2,105,584 2,477,671 4,103,072
Changes in undistributed cash . . . . 18,504 566 19,730 586
---------- ---------- ---------- -----------
Cash distributions . . . . . . . . . $1,363,592 $2,106,150 $2,497,401 $4,103,658
========== ========== ========== ==========
Cash distributions per Unit . . . . . $ .07180 $ .11090 $ .13150 .21608
========== ========== ========== ==========
Units outstanding . . . . . . . . . . 18,991,304 18,991,304 18,991,304 18,991,304
========== ========== ========== ==========
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
JUNE 30, DECEMBER 31,
ASSETS 1995 1994
------------- ------------
(UNAUDITED)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,732 $ 21,462
Net overriding royalty interests in productive oil and gas
properties and 3% royalty interests in fee lands
(notes 2, 3 and 5) . . . . . . . . . . . . . . . . . . . . . 83,490,000 83,490,000
Less accumulated amortization (note 3) . . . . . . . . . . . . (76,857,000) (76,481,000)
----------- -----------
Total assets . . . . . . . . . . . . . . . . . $ 6,634,732 $ 7,030,462
=========== ===========
LIABILITIES AND TRUST CORPUS
Trust Corpus (18,991,304 Units of Beneficial Interest
authorized, issued and outstanding) . . . . . . . . . . . . . $ 6,634,732 $ 7,030,462
Contingencies (note 4)
----------- -----------
Total liabilities and trust corpus . . . . . . $ 6,634,732 $ 7,030,462
=========== ===========
STATEMENTS OF CHANGES IN TRUST CORPUS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1995 1994
------------ ------------
Trust Corpus, beginning of period (note 3) . . . . . . . . . . $ 7,030,462 $ 8,439,106
Cash earnings . . . . . . . . . . . . . . . . . . . . . . . . 2,447,671 4,103,072
Cash distributions . . . . . . . . . . . . . . . . . . . . . . (2,497,401) (4,103,658)
Amortization of royalty interest (note 3) . . . . . . . . . . . (376,000) (766,000)
------------ ------------
Trust Corpus, end of period . . . . . . . . . . . . . . . . . . $ 6,634,732 $ 7,672,520
============ =============
The accompanying notes are an integral part of these financial statements.
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(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.
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 Texas Commerce Bank 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.
(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) from the Productive Properties.
For purposes of computing Net Proceeds, the Productive Properties have been
grouped geographically into four 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, ad
valorem and windfall profits 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; 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 June 30, 1995, the Fee Lands consisted of
approximately 35,000 gross acres.
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995
(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 June 30, 1995, is not necessarily
indicative of the fair market value of the interests held by the Trust.
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, 1994.
(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 will be
considered an economic interest in oil and gas in place, and each Overriding
Royalty will 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
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LL&E ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995
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
has become final.
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 AT OFFSHORE LOUISIANA
The conveyances creating the Overriding Royalties permit the Company,
under certain circumstances, to establish an escrow for various matters. From
the August 1991 distribution through the August 1992 distribution the Company
escrowed funds from Offshore Louisiana in connection with anticipated platform
dismantlement costs of Offshore Louisiana. The Company ceased escrowing for
dismantlement costs at Offshore Louisiana beginning with the September 1992
distribution because it had fully escrowed the amount currently estimated to be
ultimately incurred for dismantlement of platforms located on this property.
The total cumulative Offshore Louisiana escrow balance as of June 30, 1995 was
approximately $2,400,000, 90% of which was otherwise distributable to the
Trust.
The Company has advised the Trustee that it intends to continue to
monitor its estimates of relevant factors in order to evaluate the necessity of
escrowing funds on an ongoing basis, whether in connection with dismantlement
costs or other matters. The Company 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 Company decides to escrow
additional amounts, the Royalties paid to the Trust could be reduced, and the
reductions could be significant.
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INDEPENDENT AUDITORS' REVIEW REPORT
Texas Commerce Bank 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 June 30, 1995, and the related
statements of cash earnings and distributions for the three-month and six-month
periods ended June 30, 1995 and 1994 and changes in Trust corpus for the
six-month periods ended June 30, 1995 and 1994. 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, 1994, 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 3, 1995, we expressed an
unqualified opinion on those financial statements.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
August 4, 1995
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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 conveyances creating the Overriding Royalties permit the Working
Interest Owner, under certain circumstances, to establish escrows for various
matters. The Working Interest Owner has escrowed approximately $2,400,000 from
the Offshore Louisiana property, 90% of which would otherwise have been
distributable to the Trust, in preparation for anticipated platform
dismantlement costs. The Working Interest Owner has advised the Trustee that
under the terms of the conveyances it is permitted to escrow funds from the Jay
Field, South Pass 89 and Offshore Louisiana properties at present and that it
intends to continue monitoring its estimates of relevant factors in order to
continually 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 and six-month periods ended June 30, 1995 and
1994 (the 1995 and 1994 "Second Quarter" and "First Half", respectively) are
attributable to the Working Interest Owner's operations during the periods
January through March (the "Three-Month Operating Periods") of 1995 and 1994,
respectively, and the periods October 1994 through March 1995 and October 1993
through March 1994 (the 1995 and 1994 "Six-Month Operating Periods",
respectively).
Distributions to Unit holders for the 1995 and 1994 Second Quarters
amounted to $1,363,592 ($0.07180 per Unit) and $2,106,150 ($0.11090 per Unit),
respectively. During these periods, the Trust received cash of $1,528,171 and
$2,276,744, respectively, from the Working Interest Owner with respect to the
Royalties from the Properties.
The monthly per Unit distributions during the 1995 and 1994 Second
Quarters were as follows:
1995 1994
---- ----
April $.0172 $.0318
May .0233 .0377
June .0313 .0414
------ ------
$.0718 $.1109
Distributions to Unit holders for the First Half of 1995 and 1994
amounted to $2,497,401 ($0.13150 per Unit) and $4,103,658 ($0.21608 per Unit),
respectively. During these periods, the Trust received cash of $2,836,261 and
$4,484,019, respectively, from the Working Interest Owner with respect to the
Royalties from the Properties.
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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 Second Quarter and First Half of 1995:
SECOND QUARTER 1995
FORT
SOUTH OFFSHORE WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
--------- ------- --------- ----- -----
Revenues:
Liquids . . . . . . . . $5,601,317 $ 2,589,142 $ 503,859 $ 0 $ 8,694,318
Natural Gas . . . . . . 451,837 1,829,557 1,074,076 10,850 3,366,320
Special cost escrow (1) 0 0 80,000 0 80,000
---------- ----------- ----------- ----------- -----------
6,053,154 4,418,699 1,657,935 10,850 12,140,638
Production costs and
expenses. . . . . . . . (2,733,894) (381,844) (426,613) (24,047) $(3,566,398)
Capital expenditures . . . (1,992,344) (2,415,108) (8,135) 0 (4,415,587)
---------- ----------- ----------- ----------- -----------
Net Proceeds (Excess
Production Costs) . . . $1,326,916 $ 1,621,747 $ 1,223,187 $ (13,197) $ 4,158,653
========== =========== =========== ========== ===========
Overriding Royalties paid
to the Trust(2) . . . . $ 663,458 $ 810,874 $ 0 $ 0 $ 1,474,332
========== =========== ============ ===========
Fee Lands Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,839
------------
Royalties paid to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,528,171
===========
FIRST HALF 1995
FORT
SOUTH OFFSHORE WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
--------- ------- --------- ----- -----
Revenues:
Liquids . . . . . . . . $11,511,880 $5,092,463 $ 995,035 $ 0 $17,599,378
Natural Gas . . . . . . 559,137 3,428,427 1,723,884 28,813 5,740,261
Special cost escrow(1) 0 0 80,000 0 80,000
---------- ---------- ----------- ---------- -----------
12,071,017 8,520,890 2,798,919 28,813 23,419,639
Production costs and
expenses . . . . . . . (5,425,434) (813,437) (1,042,435) (48,430) (7,329,736)
Capital expenditures . . . (3,872,737) (4,834,538) (1,126,256) 0 (9,833,531)
---------- ---------- ---------- --------- -----------
Net Proceeds (Excess
Production Costs) . . . $2,772,846 $2,872,915 $ 630,228 $ (19,617) $ 6,256,372
========== ========== ========== ========= ===========
Overriding Royalties paid
to the Trust(2) . . . . $1,386,423 $1,329,812 $ 0 $ 0 $ 2,716,235
========== ========== ============ =========
Fee Lands Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,026
-----------
Royalties paid to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,836,261
-------------- ===========
(1) From the August 1991 distribution through the August 1992 distribution
the Working Interest Owner escrowed amounts from Offshore Louisiana in
connection with anticipated dismantlement costs. Based on most recent
estimates of abandonment costs, the escrowed amount has been reduced by
$80,000 in the second quarter. As of June 30, 1995 approximately $2.4
million has been escrowed for future dismantlement costs.
(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. At Offshore
Louisiana and Fort Worth Basin approximately $837,000 and $23,000,
respectively, of excess production costs were recoverable from future
revenues as of June 30, 1995.
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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 Second Quarter and First Half of 1994:
SECOND QUARTER 1994
FORT
SOUTH OFFSHORE WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
--------- ------- --------- ----- -----
Revenues:
Liquids . . . . . . . . $4,603,660 $ 1,763,329 $ 456,113 $ 78 $ 6,823,180
Natural Gas . . . . . . 86,457 3,323,474 1,195,419 26,366 4,631,716
---------- ----------- ----------- ---------- -----------
4,690,117 5,086,803 1,651,532 26,444 11,454,896
Production costs and
expenses . . . . . . . . (2,478,919) (640,448) (609,169) (34,009) (3,762,545)
Capital expenditures . . . (1,158,069) (1,078,395) (515,236) 0 (2,751,700)
---------- ---------- ----------- ----------- -----------
Net Proceeds (Excess
Production Costs) . . . . $1,053,129 $ 3,367,960 $ 527,127 $ (7,565) $ 4,940,651
========== =========== =========== =========== ===========
Overriding Royalties paid
to the Trust(1) . . . . $ 526,564 $ 1,683,981 $ 0 $ 0 $ 2,210,545
========== =========== =========== ===========
Fee Lands Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,199
-----------
Royalties paid to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,276,744
===========
FIRST HALF 1994
FORT
SOUTH OFFSHORE WORTH
JAY FIELD PASS 89 LOUISIANA BASIN TOTAL
--------- ------- --------- ----- -----
Revenues:
Liquids . . . . . . . . $9,665,178 $3,902,385 $ 1,132,787 $ 112 $14,700,462
Natural Gas . . . . . . 286,480 5,721,587 1,905,877 56,855 7,970,799
----------- ---------- ---------- --------- -----------
9,951,658 9,623,972 3,038,664 56,967 22,671,261
Production costs and
expenses . . . . . . . . (4,720,422) (953,070) (1,219,167) (66,385) (6,959,044)
Capital expenditures . . . (2,479,818) (2,769,806) (3,200,303) 0 (8,449,927)
---------- ---------- ----------- ---------- -----------
Net Proceeds (Excess
Production Costs) . . . . $2,751,418 $5,901,096 $(1,380,806) $ (9,418) $ 7,262,290
========== ========== =========== ========= ===========
Overriding Royalties paid
to the Trust(1) . . . . . $1,375,709 $2,950,548 $ 0 $ 2,864 $ 4,329,121
========== ========== ============ =========
Fee Lands Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,898
-----------
Royalties paid to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,484,019
--------------
(1) 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. At Offshore
Louisiana and Fort Worth Basin, approximately $2,450,000 and $13,000,
respectively, of excess production costs were recoverable from future
revenues as of June 30, 1994.
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The following unaudited schedule provides a summary of the Working
Interest Owner's calculation of the Net Proceeds from the Properties and the
Royalties paid to the Trust for the Second Quarter and First Half of 1995 and
1994:
SECOND QUARTER FIRST HALF
-------------------------------- -------------------------------
1995 1994 1995 1994
------------- ------------- -------------- -------------
Net Proceeds:
Revenues . . . . . . . . . . . . $12,140,638 $11,454,896 $23,419,639 $22,671,261
Production costs and expenses . . (3,566,398) (3,762,545) (7,329,736) (6,959,044)
Capital expenditures . . . . . . (4,415,587) (2,751,700) (9,833,531) (8,449,927)
----------- ----------- ----------- -----------
Net Proceeds . . . . . . . . . . $ 4,158,653 $ 4,940,651 $ 6,256,372 $ 7,262,290
=========== =========== =========== ===========
Royalties paid to the Trust:
Overriding Royalties . . . . . . $ 1,474,332 $ 2,210,545 $ 2,716,235 $ 4,329,121
Fee Lands Royalties . . . . . . . 53,839 66,199 120,026 154,898
----------- ---------- ----------- -----------
Royalties paid to the Trust . . . $ 1,528,171 $ 2,276,744 $ 2,836,261 $ 4,484,019
=========== =========== =========== ===========
Revenues of the Working Interest Owner with respect to the Productive
Properties in the 1995 Three-Month Operating Period increased 6% from the 1994
Three-Month Operating Period primarily due to increased crude oil and natural
gas liquids prices combined with higher natural gas production at Offshore
Louisiana and higher natural gas liquids production at Jay Field and Offshore
Louisiana. Also contributing to the increase was the April 1995 reduction of
amounts previously escrowed from the Offshore Louisiana property in connection
with estimated dismantlement costs by $80,000. These increases in revenues
were partially offset by lower natural gas prices and reduced natural gas
volumes at Jay Field due to maintenance activity and at South Pass 89 due to
voluntary production curtailment. Average crude oil, natural gas liquids and
natural gas prices received by the Working Interest Owner for production in
the 1995 Three-Month Operating Period were $17.26, $10.51 and $1.57,
respectively. In the 1994 Three-Month Operating Period average crude oil,
natural gas liquids and natural gas prices were $13.91, $9.14 and $2.54,
respectively.
Production costs and expenses incurred by the Working Interest Owner on
the Productive Properties in the 1995 Three-Month Operating Period decreased
5% primarily due to lower operating costs at South Pass 89 and Offshore
Louisiana and lower workover costs and repair and maintenance charges at Jay
Field.
Capital expenditures increased 61% in the 1995 Three-Month Operating
Period from the 1994 Three-Month Operating Period. This increase resulted from
drilling activity at South Pass 89 and higher facilities costs at Jay Field.
In the 1995 Six-Month Operating Period, revenues increased 3% from the
1994 Six-Month Operating Period primarily due to higher crude oil and natural
gas liquids prices, an increase in crude oil production at Jay Field due to
reduced downtime, and higher natural gas production at Offshore Louisiana. Also
contributing to the increase was the aforementioned $80,000 release of amounts
previously escrowed. The increase in revenues was
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almost offset by lower natural gas prices, which resulted in voluntary
curtailment of production at South Pass 89, and lower crude oil production at
South Pass 89 and Offshore Louisiana. In the 1995 Six-Month Operating Period
average crude oil, natural gas liquids and natural gas prices received by the
Working Interest Owner were $16.88, $10.85 and $1.53, respectively. In the
comparable 1994 period, average prices were $14.90 for crude oil, $8.09 for
natural gas liquids and $2.49 for natural gas.
Production costs and expenses incurred by the Working Interest Owner on
the Productive Properties in the 1995 Six-Month Operating Period increased 5%
from the 1994 Six-Month Operating Period. The increase was primarily
due to higher repairs and maintenance costs and higher workover costs at
Jay Field, substantially offset by lower operating costs at South Pass 89
and Offshore Louisiana.
Capital expenditures incurred by the Working Interest Owner on the
Productive Properties during the 1995 Six-Month Operating Period increased 16%
from the 1994 Six-Month Operating Period. An increase in drilling activity at
South Pass 89, higher expenditures for nitrogen injectant at Jay Field, the
allocation of additional South Pass 86 platform costs and higher facilities
costs at South Pass 89 and Offshore Louisiana were partially offset by
decreased drilling activity at 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
72,455 barrels for the 1995 Three-Month Operating Period and 82,296 barrels
for the 1994 Three-Month Operating Period. Imputed natural gas production was
204,988 thousand cubic feet and 441,185 thousand cubic feet for the respective
periods.
During the First Half of 1995, one successful gas well was completed at
South Pass 89. No drilling activities occurred on the Fee Lands.
As described in more detail in the Trust's Annual Report on Form 10-K for
the year ended December 31, 1994, under Louisiana law, mineral royalties
generally terminate, in 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 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 June 30, 1995, the Fee Lands consisted of
approximately 35,000 gross acres in South Louisiana, approximately 6,350 of
which were under lease.
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P A R T I I
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits -- None.
(b) Reports on Form 8-K -- None.
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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: TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
TRUSTEE
BY: /S/ MICHAEL J. ULRICH
-----------------------------
MICHAEL J. ULRICH
VICE PRESIDENT AND
TRUST OFFICER
Date: August 11, 1995
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.
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