1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
For the Quarterly Period Ended June 30, 2001
Commission File No. 1-8032
SAN JUAN BASIN ROYALTY TRUST
Texas I.R.S. No. 75-6279898
Bank One, NA, Trust Department
P. O. Box 2604
Fort Worth, Texas 76113
Telephone Number 817/884-4630
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 [ ]
Number of Units of beneficial interest outstanding at July 30, 2001: 46,608,796
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SAN JUAN BASIN ROYALTY TRUST
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The condensed financial statements included herein have been prepared by Bank
One, NA as Trustee for the San Juan Basin Royalty Trust (the "Trust"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial statements have been condensed or omitted pursuant to Rule
10-01 of Regulation S-X promulgated under the Securities and Exchange Act of
1934, although the Trustee believes that the disclosures are adequate to make
the information presented not misleading. These condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Trust's annual report on Form 10-K for the year ended
December 31, 2000. In the opinion of the Trustee, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the assets,
liabilities and trust corpus of the San Juan Basin Royalty Trust at June 30,
2001, and the distributable income and changes in trust corpus for the
three-month periods and six-month periods ended June 30, 2001 and 2000 have been
included. The distributable income for such interim periods is not necessarily
indicative of the distributable income for the full year.
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SAN JUAN BASIN ROYALTY TRUST
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
<Table>
<Caption>
JUNE 30, DECEMBER 31,
ASSETS ..................................................... 2001 2000
(UNAUDITED)
Cash and short-term investments ............................ $ 7,783,502 $ 6,972,892
Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $94,545,973 and 92,588,674
at June 30, 2001 and December 31, 2000, respectively) ... 38,730,055 40,686,854
-------------- --------------
$ 46,513,557 $ 47,659,746
============== ==============
LIABILITIES AND TRUST CORPUS
Distribution payable to Unit holders ....................... $ 7,783,502 $ 6,972,892
Commitments and contingencies
Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding ..................... 38,730,055 40,686,854
------------- --------------
$ 46,513,557 $ 47,659,746
============== ==============
</Table>
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2001 2000 2001 2000
Royalty income ......................... $26,585,943 $ 13,608,946 $64,075,915 $ 23,685,540
Interest income ........................ 72,624 17,107 131,692 41,602
26,658,567 13,626,053 64,207,607 23,727,142
General and administrative
expenditures ........................... 407,824 433,233 694,349 645,819
Distributable income ................... $26,250,743 $ 13,192,820 $63,513,258 $ 23,081,323
Distributable income per Unit
(46,608,796 Units) ..................... $ .563215 $ .283054 $ 1.362688 $ .495214
</Table>
The accompanying notes to condensed financial statements are an integral part of
these statements.
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SAN JUAN BASIN ROYALTY TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2001 2000 2001 2000
Trust corpus, beginning of period ...... $ 39,519,162 $ 43,972,106 $ 40,686,854 $ 45,186,199
Amortization of net overriding
royalty interest ....................... (789,107) (963,459) (1,956,799) (2,177,552)
Distributable income ................... 26,250,743 13,192,820 63,513,258 23,081,323
Distributions declared ................. (26,250,743) (13,192,820) (63,513,258) (23,081,323)
Total corpus, end of period ............ $ 38,730,055 $ 43,008,647 $ 38,730,055 $ 43,008,647
============== ============== ============== ==============
</Table>
The accompanying notes to condensed financial statements are an integral part of
these statements.
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SAN JUAN BASIN ROYALTY TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF ACCOUNTING
The San Juan Basin Royalty Trust was established as of November 1,
1980. The financial statements of the Trust are prepared on the
following basis:
o Royalty income recorded for a month is the amount computed and
paid by the working interest owner, Burlington Resources Oil &
Gas Company LP f/k/a Burlington Resources Oil & Gas Company
("BROG"), to the Trustee for the Trust. Royalty income
consists of the amounts received by the owner of the interest
burdened by the net overriding royalty interest ("Royalty")
from the sale of production less accrued production costs,
development and drilling costs, applicable taxes, operating
charges, and other costs and deductions, multiplied by 75%.
o Trust expenses recorded are based on liabilities paid and cash
reserves established from Royalty income for liabilities and
contingencies.
o Distributions to Unit holders are recorded when declared by
the Trustee.
o The conveyance which transferred the overriding royalty
interest to the Trust provides that any excess of production
costs over gross proceeds must be recovered from future net
profits.
The financial statements of the Trust differ from financial statements
prepared in accordance with accounting principles generally accepted in
the United States of America ("GAAP") because revenues are not accrued
in the month of production; certain cash reserves may be established
for contingencies which would not be accrued in financial statements
prepared in accordance with GAAP; and amortization of the Royalty
calculated on a unit-of-production basis is charged directly to trust
corpus.
2. FEDERAL INCOME TAXES
For federal income tax purposes, the Trust constitutes a fixed
investment trust which is taxed as a grantor trust. A grantor trust is
not subject to tax at the trust level. The Unit holders are considered
to own the Trust's income and principal as though no trust were in
existence. The income of the Trust is deemed to have been received or
accrued by each Unit holder at the time such income is received or
accrued by the Trust rather than when distributed by the Trust.
The Royalty constitutes an "economic interest" in oil and gas
properties for federal income tax purposes. Unit holders must report
their share of the revenues of the Trust as ordinary income from oil
and gas royalties and are entitled to claim depletion with respect to
such income. The Royalty is treated as a single property for depletion
purposes.
The Trust has on file technical advice memoranda confirming the tax
treatment described above.
The Trust began receiving royalty income from coal seam gas wells
beginning in 1989. Under Section 29 of the Internal Revenue Code, coal
seam gas production from wells drilled prior to January 1, 1993
(including certain wells recompleted in coal seam formations
thereafter), generally qualifies for the federal income tax credit for
producing non-conventional fuels if such production
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and the sale thereof occurs before January 1, 2003. For 2000, this tax
credit was $1.06 per MMBtu. To benefit from the credit, each Unit
holder must determine from the tax information they receive from the
Trust, their pro rata share of qualifying production of the Trust,
based upon the number of Units owned during each month of the year, and
the amount of available credit per MMBtu for the year, and then apply
the tax credit against their own income tax liability, but such credit
may not reduce their regular tax liability (after the foreign tax
credit and certain other nonrefundable credits) below their alternative
minimum tax. Section 29 also provides that any amount of Section 29
credit disallowed for the tax year solely because of this limitation
will increase their credit for prior year minimum tax liability, which
may be carried forward indefinitely as a credit against the taxpayer's
regular tax liability, subject, however, to the limitations described
in the preceding sentence. There is no provision for the carryback or
carryforward of the Section 29 credit in any other circumstances.
The Trustee is provided summary Section 29 tax credit information
related to Trust properties by BROG, which information is then passed
along to the Unit holders. In 1999, the U.S. Court of Appeals for the
10th Circuit upheld the position of the Internal Revenue Service and
the Tax Court that nonconventional fuel such as coal seam gas does not
qualify for the Section 29 credit unless the producer has received an
appropriate well category determination from the Federal Energy
Regulatory Commission ("FERC"). The FERC's certification authority
expired effective January 1, 1993. However, on July 14, 2000, the FERC
issued a final ruling amending its regulations to reinstate certain
regulations involving well category determinations for all wells and
tight formation areas that could qualify for the Section 29 tax credit.
BROG has informed the Trustee that it has identified approximately 250
wells as non-certified. Of those, BROG has determined that six do not
qualify for the Section 29 tax credit. BROG has applied to the FERC for
certification of the approximately 100 qualified wells operated by it,
and is in communication with the operators of the remaining qualified
wells to encourage the filing by those operators of applications for
certification.
The classification of the Trust's income for purposes of the passive
loss rules may be important to a Unit holder. As a result of the Tax
Reform Act of 1986, royalty income will generally be treated as
portfolio income and will not reduce passive losses.
3. CONTINGENCIES
See Part II - Item 1, "Legal Proceedings" concerning the status of
litigation matters.
4. UNDERCHARGE OF CAPITAL EXPENDITURES AND LEASE OPERATING EXPENSES
Based on its 1999 year-end review, BROG determined that it had
undercharged the Trust for both capital expenditures and lease
operating charges related to properties burdened by the Trust but not
operated by BROG. In April and May of 2000, BROG reduced royalty income
otherwise payable to the Trust by an additional $652,303 in capital
expenditures and $1,689,509 in lease operating charges related to the
undercharged non-operated properties. The Trust's consultants have
reviewed BROG's cost reporting data and confirmed that these additional
charges were appropriate.
5. SETTLEMENT OF CLAIMS RELATING TO GAS IMBALANCE
In June 2000, the Trust and BROG entered into a partial settlement of
claims relating to a gas imbalance with respect to production from
mineral properties currently operated by BROG. Under the terms of the
partial settlement BROG paid the Trust $3,490,000 to settle the
imbalance insofar as it relates to some of the wells located on the
subject properties. The remainder of the imbalance is to be addressed
through volume adjustments whereby the Trust's net overriding royalty
interest will be applied to 50% of the overproduced parties' interest,
on a monthly basis, until the imbalance is corrected. The Trust is in
communication with BROG in order to determine the estimated value of
the volume adjustments and the time during which the remainder of the
imbalance will be corrected. BROG has informed the Trust that the
volume adjustments were to have commenced in August 2000. Such volume
adjustments will be monitored by the Trust's consultants.
******
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ITEM 2. TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
FORWARD-LOOKING INFORMATION.
Certain information included in this report contains, and other materials filed
or to be filed by the Trust with the Securities and Exchange Commission (as well
as information included in oral statements or other written statements made or
to be made by the Trust) may contain or include, forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, and
Section 27A of the Securities Act of 1933. Such forward-looking statements may
be or may concern, among other things, capital expenditures, drilling activity,
development activities, production efforts and volumes, hydrocarbon prices and
the results thereof, and regulatory matters. Such forward-looking statements
generally are accompanied by words such as "may," "will," "estimate," "expect,"
"predict," "anticipate," "goal," "should," "assume," "believe," "plan,"
"intend," or other words that convey the uncertainty of future events or
outcomes. Such statements reflect our current view with respect to future
events; are based on our assessment of, and are subject to, a variety of factors
deemed relevant by the Trustee and involve risks and uncertainties. Should one
or more of these risks or uncertainties occur, actual results may vary
materially and adversely from those anticipated.
THREE MONTHS ENDED JUNE 30, 2001 AND 2000:
The Trust received royalty income of $26,585,943 and interest income of $72,624
during the second quarter of 2001. After deducting administrative expenses of
$407,824, distributable income for the quarter was $26,250,743 ($.563215 per
Unit). In the second quarter of 2000, royalty income was $13,608,946, interest
income was $17,107, administrative expenses were $433,233 and distributable
income was $13,192,820 ($.283054 per Unit). The royalty income amount of
$13,608,946 for the quarter ended June 30, 2000, included $3,490,000 paid to the
Trust as partial settlement of its claims relating to the gas imbalance
described in Part I - Item 1, Note 5 as partially offset by the reductions for
undercharged capital expenditures and lease operating expenses described in Part
I - Item 1, Note 4. The tax credit relating to production from coal seam wells
totaled approximately $.04 per Unit for the second quarter of 2001 and $.04 per
Unit for the second quarter of 2000. For further information concerning this tax
credit, Unit holders should refer to the Trust's Annual Report for 2000. Based
on 46,608,796 Units outstanding, the per Unit distributions during the second
quarter of 2001 were as follows:
<Table>
<Caption>
April........................................................ $ .223576
May.......................................................... .172642
June......................................................... .166997
--------------
Quarter Total................................................ $ .563215
==============
</Table>
The royalty income distributed in the second quarter of 2001 was higher than
that distributed in the second quarter of 2000, primarily due to an increase in
the average gas price from $2.39 per Mcf for the second quarter of 2000 to $4.92
per Mcf for the second quarter of 2001. Interest earnings for the quarter ended
June 30, 2001, as compared to the quarter ended June 30, 2000, were higher,
primarily due to an increase in funds available for investment. Administrative
expenses were lower, primarily as a result of differences in timing of the
receipt and payment of these expenses.
The capital costs attributable to the properties from which the Trust's 75% net
overriding royalty ("Royalty") was carved (the "Underlying Properties") for the
second quarter of 2001 were reported by BROG as $7,078,879. BROG advised the
Trust that capital expenditures for 2001 are projected to be $30,200,000.
Capital expenditures were $4,779,093 (including $652,303 in prior period
adjustments relating to non-operated properties) for the second
quarter of 2000 and approximately $24,700,000 in capital expenditures were used
in calculating the Royalty in 2000. BROG informed the Trust that its goal in
increasing capital expenditures for 2001 and 2000 was to offset the natural
decline in production from the
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Underlying Properties. BROG has reported favorable results in this effort in
that natural gas production for calendar 2000 and for the six months ended June
30, 2001 averaged approximately 116 MMcf per day, as compared to average
production of approximately 113 MMcf per day for calendar 1999.
BROG has informed the Trust that lease operating expenses and property taxes
were $3,810,641 and $83,751, respectively, for the second quarter of 2001, as
compared to $4,944,492 (including $1,689,509 in prior period adjustments
relating to non-operated properties) and $84,317, respectively, for the second
quarter of 2000.
BROG has also informed the Trustee that 11 gross (5.69 net) conventional wells,
five gross (3.47 net) conventional recompletions, 35 gross (2.22 net)
conventional payadds, four gross (0.03 net) coal seam recavitations and one
gross (.88 net) coal seam payadd were completed as of June 30, 2001. Ninety-six
gross (33.86 net) conventional wells, 44 gross (21.69 net) conventional
recompletions, and 30 gross (9.90 net) conventional payadds were in progress
during the second quarter of 2001. One gross (.03 net) coal seam wells and five
gross (.19 net) coal seam recompletions were in progress as of June 30, 2001.
"Gross" acres or well, for purposes of this discussion, means the entire
ownership interest of all parties in such properties, and BROG's interest
therein is referred to as the "net" acres or wells.
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Royalty income for the quarter ended June 30, 2001 is associated with actual gas
and oil production during February 2001 through April 2001 from the Underlying
Properties. Gas and oil sales from the Underlying Properties for the quarters
ended June 30, 2001 and 2000 were as follows:
<Table>
<Caption>
2001 2000
Gas:
Total sales (Mcf)....................................................... 10,355,225 10,662,060
Mcf per day............................................................. 116,351 118,467
Average price (per Mcf)................................................. $4.92 $2.39
Oil:
Total sales (Bbls)...................................................... 24,830 21,777
Bbls per day............................................................ 279 242
Average price (per Bbl)................................................. $24.60 $21.66
Gas and oil sales attributable to the Royalty for the quarters ended June 30, 2001 and 2000 were as follows:
Gas sales (Mcf)............................................................ 5,874,782 4,567,487
Oil sales (Bbls)........................................................... 14,203 9,473
</Table>
Since the oil and gas sales attributable to the Royalty are based on an
allocation formula that is dependent on such factors as price and cost,
including capital expenditures, the aggregate production volumes from the
Underlying Properties may not provide a meaningful comparison to volumes
attributable to the Royalty.
During the second quarter of 2001, gas prices were more than double the prices
reported during the second quarter of 2000. The price per barrel of oil during
the second quarter of 2001 was $2.94 per barrel higher than that received for
the second quarter of 2000 due to increases in oil prices in world markets
generally, including the posted prices applicable to oil sales attributable to
the Royalty.
All volumes of gas which are subject to the Royalty (the "Trust gas") are
currently sold under a contract dated November 10, 1999 between BROG and Duke
Energy and Marketing L.L.C. That contract, as amended, provides for the delivery
of Trust gas at various delivery points over a period commencing January 1,
2000, and ending March 31, 2002, and provides for the sale of Trust gas at
prices which fluctuate in accordance with published indices for gas sold in the
San Juan Basin of New Mexico. Unit holders are referred to Note 6 of the Notes
to Financial Statements in the Trust's 2000 Annual Report for further
information concerning the marketing of gas produced from the Underlying
Properties.
In June 2000, the Trust and BROG entered into a partial settlement of claims
relating to a gas imbalance with respect to production from mineral properties
currently operated by BROG. Under the terms of the partial settlement, BROG paid
the Trust $3,490,000 to settle the imbalance insofar as it relates to some of
the wells located on the subject properties. The remainder of the imbalance is
to be addressed through volume adjustments whereby the Trust's net overriding
royalty interest will be applied to 50% of the overproduced parties' interest,
on a monthly basis, until the imbalance is corrected. The Trust is in
communication with BROG in order to determine the estimated value of the volume
adjustments and the time during which the remainder of the imbalance will be
corrected. BROG has informed the Trust that the volume adjustments were to have
commenced in August 2000. Such volume adjustments will be monitored by the
Trust's consultants.
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CALCULATION OF ROYALTY INCOME:
Royalty income received by the Trust for the three months and six months ended
June 30, 2001 and 2000, respectively, was computed as shown in the following
table:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
Gross proceeds of sales from the
Underlying Properties:
Gas proceeds ........................... $ 50,937,406 $ 25,242,345 $ 116,386,514 $ 47,756,306
Oil proceeds ........................... 610,706 483,594 1,278,045 1,009,004
-------------- -------------- -------------- --------------
Total .................................. 51,548,112 25,725,939 117,664,559 48,765,310
-------------- -------------- -------------- --------------
Less production costs:
Severance tax - Gas .................... 5,032,073 2,266,118 11,411,509 4,460,637
Severance tax - Oil .................... 54,843 38,382 118,664 90,422
Severance tax - Other .................. 148
Lease operating expense and property
tax (a) ................................ 3,894,392 5,028,808 7,256,768 8,136,369
Capital expenditures (a) ............... 7,078,879 4,779,093 13,402,918 9,362,219
Other .................................. 40,000 121,610 40,000 121,610
-------------- -------------- -------------- --------------
Total .................................. 16,100,187 12,234,011 32,230,007 22,171,257
-------------- -------------- -------------- --------------
Net profits ............................ 35,447,925 13,491,928 85,439,552 26,594,053
Net overriding royalty interest ........ 75% 75% 75% 75%
-------------- -------------- -------------- --------------
Subtotal ............................... 26,585,943 10,118,946 64,075,915 19,945,540
Other (b) -- 3,490,000 -- 3,740,000
-------------- -------------- -------------- --------------
Royalty income ......................... 26,585,943 13,608,946 64,075,915 23,685,540
============== ============== ============== ==============
</Table>
(a) Includes charges received from BROG during the three months ended June 30,
2000 for capital expenditures ($652,303) and lease operating costs ($1,689,509)
relating to non-operated properties not previously charged to the Trust (see
Note 4 to the financial statements).
(b) Represents additional revenues of $3,490,000 received in the second quarter
of 2000 as settlement of a gas imbalance and a $250,000 offset to lease
operating expense in the first quarter of 2000 in connection with the settlement
of litigation (see Part II - Item 1, "Legal Proceedings").
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Trust has not entered into derivative financial instruments, derivative
commodity instruments or other similar instruments during the quarter ended June
30, 2001. The Trust does not market the Trust gas, oil and/or natural gas
liquids. BROG is responsible for such marketing.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Trust is not a party to any litigation. However, the Trust is aware that
BROG is involved in litigation from time to time that could affect the royalty
income received by the Trust.
On September 4, 1996, the Trustee announced the settlement of a lawsuit (the
"Litigation") filed by the Trustee against BROG and Southland Royalty Company.
Under the terms of the Settlement Agreement, BROG agreed (i) to pay $19,750,000
in cash plus interest earnings thereon from September 5, 1996, in settlement of
underpayment of royalty claims of the Trust; and (ii) commencing in 1997, to
credit the Trust with $250,000 per year for five years as an offset against
lease operating expenses chargeable to the Trust for purposes of the calculation
of net proceeds payable to the Trust. BROG also agreed to make certain
adjustments that represent cost reductions favorable to the Trust in the ongoing
charges for coal seam gas gathering and treating on BROG's Val Verde system.
Additionally, the Trustee and BROG established a formal protocol intended to
provide the Trustee and its representatives improved access to BROG's books and
records applicable to the Underlying Properties. Agreement was also reached
regarding marketing arrangements for the sale of Trust gas, oil and natural gas
liquids products going forward as more particularly described in "Pricing
Information" under ITEM 2. "PROPERTIES" of the Trust's Report on Form 10-K,
filed on March 30, 2001.
The Mineral Management Service of the United States Department of the Interior
(the "MMS") has notified BROG of underpaid royalty related to coal seam gas
including inappropriate deductions for costs to separate carbon dioxide from the
gas. BROG has continued to calculate and pay royalties using deductions the MMS
is attempting to disallow. The Company has appealed the MMS Demand Letter dated
October 28, 1996. There is a tolling agreement with the MMS while settlement
negotiations are attempted.
An administrative claim was initiated on March 17, 1997, by the MMS against BROG
regarding a gas contract settlement dated March 1, 1990, between BROG and
certain other parties thereto (the "1997 MMS Claim"). The claim alleges that
additional royalties are due on production from federal and Indian leases in the
State of New Mexico on properties that are burdened by the Royalty. BROG has
informed the Trust that it has reached an agreement in principle to settle the
1997 MMS Claim for $2,728,974.15 and that if this claim is settled on that
basis, royalty income received by the Trust will be reduced by $2,046,730.50.
The Trust's legal advisors and joint interest auditors will review the proposed
reduction in royalty income.
A separate administrative claim was initiated on June 10, 1998, by the MMS
against BROG related to production from lands on the Jicarilla Apache Indian
Reservation (the "1998 MMS Claim"). The claim alleges that additional royalties
are due based upon the "major portion" valuation clause contained in the
Jicarilla leases. This clause contemplated royalty value to be calculated on
"the highest price paid or offered at the time of production for the major
portion of oil of the same gravity, and gas, and/or natural gasoline, and/or all
other hydrocarbon substances produced and sold from the field where the leased
lands are situated." BROG indicates that producers do not have access to prices
received by other producers in a field, so a "major portion" calculation must be
done by the MMS. BROG filed its statement of reasons in June 1999, thereby
contesting whether the royalties are payable as claimed. The 1998 MMS Claim is
in the appeal process. If the 1998 MMS Claim is successful, royalty income
received by the Trust could decrease. However, BROG has informed the Trust that
in connection with the agreement in principle for settlement of the 1997 MMS
Claim, documentation is being drafted to provide for a dollar-for-dollar credit
against any potential liability on the 1998 MMS Claim in an amount equal to the
amount paid in settlement of the 1997 MMS Claim.
BROG has successfully negotiated with the State of New Mexico for a tax refund
based upon a claim for reimbursement of compression costs used in calculating
wellhead values. BROG has obtained the approval of the Attorney General of New
Mexico of a settlement in the amount of $4,200,000. In December 2000, the
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Royalty payable to the Trust was effectively increased by $263,607 since a
portion of the settlement proceeds in that amount was applied to reduce
production costs used in calculating the Royalty. The Trust's consultants are in
communication with BROG regarding questions which have arisen concerning the
allocation of settlement proceeds.
In June 2000, the Trust and BROG entered into a partial settlement of claims
relating to a gas imbalance with respect to production from mineral properties
currently operated by BROG. Under the terms of the partial settlement BROG paid
the Trust $3,490,000 to settle the imbalance insofar as it relates to some of
the wells located on the subject properties. The remainder of the imbalance is
to be addressed through volume adjustments whereby the Trust's net overriding
royalty interest will be applied to 50% of the overproduced parties' interest,
on a monthly basis, until the imbalance is corrected. The Trust is in
communication with BROG in order to determine the estimated value of the volume
adjustments and the time during which the remainder of the imbalance will be
corrected. BROG has informed the Trust that the volume adjustments were to have
commenced in August 2000. Such volume adjustments will be monitored by the
Trust's consultants.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(4)(a) San Juan Basin Royalty Trust Indenture dated November
3, 1980, between Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) and The Fort Worth National
Bank (now Bank One, NA), as Trustee, heretofore filed as
Exhibit (4)(a) to the Trust's Annual Report on Form 10-K to
the Securities and Exchange Commission for the fiscal year
ended December 31, 1980 is incorporated herein by reference.
(4)(b) Net Overriding Royalty Conveyance from Southland
Royalty Company (now Burlington Resources Oil & Gas Company
LP) to The Fort Worth National Bank (now Bank One, NA), as
Trustee, dated November 3, 1980 (without Schedules),
heretofore filed as Exhibit (4)(b) to the Trust's Annual
Report on Form 10-K to the Securities and Exchange Commission
for the fiscal year ended December 31, 1980 is incorporated
herein by reference.
(b) Reports on Form 8-K.
The trust filed a report on Form 8-K on July 17, 2001. In the
report, the Trust reported, under Item 4, that (a) it had
dismissed Deloitte & Touche LLP as the Trust's independent
auditors and (b) it had engaged Weaver & Tidwell, L.L.P. as
the Trust's independent auditors.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANK ONE, NA, AS TRUSTEE FOR
THE SAN JUAN BASIN ROYALTY TRUST
By /s/ LEE ANN ANDERSON
---------------------------------------
Lee Ann Anderson
Vice President
Date: August 14, 2001
(The Trust has no directors or executive officers.)
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INDEX TO EXHIBITS
<Table>
<Caption>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
(4)(a) San Juan Basin Royalty Trust Indenture
dated November 3, 1980, between Southland
Royalty Company (now Burlington Resources
Oil & Gas Company LP) and The Fort Worth
National Bank (now Bank One, NA), as
Trustee, heretofore filed as Exhibit (4)(a)
to the Trust's Annual Report on Form 10-K
to the Securities and Exchange Commission
for the fiscal year ended December 31, 1980
is incorporated herein by reference.*
(4)(b) Net Overriding Royalty Conveyance from
Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) to The Fort
Worth National Bank (now Bank One, NA), as
Trustee, dated November 3, 1980 (without
Schedules), heretofore filed as Exhibit
(4)(b) to the Trust's Annual Report on Form
10-K to the Securities and Exchange
Commission for the fiscal year ended
December 31, 1980 is incorporated herein by
reference.*
</Table>
* A copy of this Exhibit is available to any Unit holder, at the actual
cost of reproduction, upon written request to the Trustee, Bank One,
NA, P.O. 2604, Fort Worth, Texas 76113.