avatar Cross Timbers Royalty Trust Finance, Insurance, And Real Estate
  • Location: Texas 
  • Founded:
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    CROSS TIMBERS ROYALTY TRUST FIRST QUARTER REPORT 2012 TO UNITHOLDERS For the quarter ended March 31, 2012, net profits income was Individualized tax information is provided annually to unitholders $4,376,980 compared to $4,350,853 for first quarter 2011. This of record. Unitholders owning units in nominee name may obtain 1% increase in net profits income is primarily the result of higher monthly tax information from the trustee upon request or from the oil and gas prices ($1.0 million) and decreased development costs trust’s website at www.crosstimberstrust.com. ($0.1 million), partially offset by decreased oil and gas production ($0.8 million) and increased production expenses ($0.2 million). This letter, and all communications to unitholders, includes See “Net Profits Income” on the following page. information provided to the trustee by XTO Energy Inc. After considering interest income of $86 and administration expense Cross Timbers Royalty Trust of $127,842, distributable income for the quarter ended March 31, By: U.S. Trust Bank of America 2012 was $4,249,224, or $0.708204 per unit of beneficial interest. Private Wealth Management, Trustee Administration expense for the quarter increased $1,069 from the prior year quarter. For first quarter 2011, distributable income was $4,224,174, or $0.704029 per unit. Distributions to unitholders for the quarter ended March 31, 2012 were: RECORD DATE PAYMENT DATE PER UNIT By: Nancy G. Willis January 31, 2012 February 14, 2012 $ 0.268375 Vice President February 29, 2012 March 14, 2012 0.219513 March 30, 2012 April 13, 2012 0.220316 $ 0.708204 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 31 2012 2011 Net Profits Income ...................................................................................... $ 4,376,980 $ 4,350,853 Interest Income ............................................................................................ 86 94 Total Income ............................................................................................... 4,377,066 4,350,947 Administration Expense................................................................................ 127,842 126,773 Distributable Income .................................................................................. $ 4,249,224 $ 4,224,174 Distributable Income Per Unit (6,000,000 units)........................................ $ 0.708204 $ 0.704029 These condensed statements of distributable income should be read in conjunction with the financial statements and notes thereto included in the trust’s 2011 annual report. For further information, see the trust’s quarterly report on Form 10-Q for the quarter ended March 31, 2012. Statements in this report to unitholders relating to future plans, predictions, events or conditions are forward-looking statements. All statements other than statements of historical fact included in this report to unitholders, including, without limitation, statements regarding the net profits interests, underlying properties, development activities, development, production and other costs and expenses, oil and gas prices and differentials to NYMEX prices, distributions to unitholders and industry and market conditions, are forward-looking statements that are subject to risks and uncertainties which are detailed in Part I, Item 1A of the trust’s Annual Report on Form 10-K for the year ended December 31, 2011, which is incorporated by this reference as though fully set forth herein. XTO Energy and the trustee assume no duty to update these statements as of any future date.


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    CROSS TIMBERS ROYALTY TRUST FIRST QUARTER REPORT 2012 Net Profits Income U.S. economy, storage levels and import levels of liquefied natural Net profits income is recorded when received by the trust, which gas. Natural gas prices are expected to remain volatile. The first is the month following receipt by XTO Energy, and generally quarter 2012 gas price is primarily related to production from two months after oil production and three months after gas October through December 2011, when the average NYMEX price production. Net profits income is generally affected by three was $3.55 per MMBtu. The average NYMEX price for January through major factors: March 2012 was $2.74 per MMBtu. At April 18, 2012, the average NYMEX futures price for the following twelve months was $2.61 ฀ ■฀oil and gas sales volumes, per MMBtu. ฀ ■ oil and gas sales prices, and ฀ ■ costs deducted in the calculation Costs of net profits income. Taxes, Transportation and Other. Taxes, transportation and other increased 2% for the first quarter primarily because of Because properties underlying the 90% net profits interests are increased oil production taxes related to higher oil revenues and royalty and overriding royalty interests, the calculation of net profits increased property taxes related to the timing of expenditures, income from these interests only includes deductions for production partially offset by decreased gas production taxes and other and property taxes, legal costs, and marketing and transportation deductions related to lower gas revenues. charges. In addition to these costs, the calculation of net profits income from the 75% net profits interests includes deductions Production Expenses. Production expense increased 29% for production expense and development costs since the related for the first quarter primarily because of increased repairs and underlying properties are working interests. maintenance, outside operated and power and fuel costs. The following are explanations of significant variances on the Development. Development costs decreased 46% for the first underlying properties from first quarter 2011 to first quarter 2012: quarter primarily because of decreased activity and costs related to Texas and Oklahoma properties underlying the 75% net profits Sales Volumes interests. Oil. Oil sales volumes decreased 7% from first quarter 2011 to first quarter 2012 primarily because of natural production decline. Contingencies Several states have enacted legislation requiring state income tax Gas. Gas sales volumes decreased 14% from first quarter 2011 withholding from nonresident recipients of oil and gas proceeds. to first quarter 2012 primarily because of natural production After consultation with its tax counsel, the trustee believes that it decline and the timing of cash receipts. is not required to withhold on payments made to the unitholders. However, regulations are subject to change by the various states, The estimated rate of natural production decline on the underlying oil which could change this conclusion. Should amounts be withheld and gas properties is approximately 6% to 8% a year. on payments made to the trust or the unitholders, distributions to the unitholders would be reduced by the required amount, subject Sales Prices to the filing of a claim for refund by the trust or unitholders for Oil. The first quarter 2012 average oil price was $93.41 per Bbl, a such amount. 18% increase from the first quarter 2011 average price of $79.31 per Bbl. Oil prices are expected to remain volatile. The first quarter 2012 oil price is primarily related to production from November 2011 through January 2012, when the average NYMEX price was $98.53 per Bbl. The average NYMEX price for February and March 2012 was $104.32 per Bbl. At April 18, 2012, the average NYMEX futures price for the following twelve months was $104.13 per Bbl. Gas. The first quarter 2012 average gas price was $7.41 per Mcf, a 11% increase from the first quarter 2011 average price of $6.69 per Mcf. Natural gas prices are affected by the level of North American production, weather, crude oil and natural gas liquids prices, the


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    CROSS TIMBERS ROYALTY TRUST FIRST QUARTER REPORT 2012 GLOSSARY Bbl Barrel (of oil) Mcf Thousand cubic feet (of natural gas) MMBtu One million British Thermal Units, a common energy measurement CROSS TIMBERS ROYALTY TRUST CALCULATIONS OF NET PROFITS INCOME The following is a summary of the calculation of the net profits income received by the trust: THREE MONTHS ENDED MARCH 31 [A] 2012 2011 INCREASE (DECREASE) Sales Volumes Oil (Bbl) [B] Underlying Properties ....................................................... 49,385 52,829 (7%) Average Per Day ............................................................... 537 574 (6%) Net Profits Interests ......................................................... 25,715 29,047 (11%) Gas (Mcf) [B] ........................................................................... Underlying Properties ....................................................... 404,748 468,436 (14%) Average Per Day ....................................................... 4,399 5,092 (14%) Net Profits Interests ......................................................... 360,252 413,119 (13%) Average Sales Prices Oil (per Bbl) ............................................................................. $ 93.41 $ 79.31 18% Gas (per Mcf) ........................................................................... $ 7.41 $ 6.69 11% Revenues Oil sales ................................................................................ $ 4,613,136 $ 4,189,749 10% Gas sales ................................................................................ 2,998,232 3,133,075 (4%) Total Revenues ................................................................. 7,611,368 7,322,824 4% Costs Taxes, transportation and other ............................................... 969,202 954,029 2% Production expenses [C]........................................................... 1,446,137 1,123,998 29% Development costs ................................................................... 105,829 194,692 (46%) Total Costs ............................................................... 2,521,168 2,272,719 11% Net Proceeds ................................................................................ $ 5,090,200 $ 5,050,105 1% Net Profits Income .......................................................................... $ 4,376,980 $ 4,350,853 1% [A] Because of the interval between time of production and receipt of royalty income by the trust, oil and gas sales for the quarter ended March 31 generally represent oil production for the period November through January and gas production for the period October through December. [B] Oil and gas sales volumes are allocated to the net profits interests based upon a formula that considers oil and gas prices and the total amount of production expense and development costs. As product prices change, the trust’s share of the production volumes is impacted as the quantity of production to cover expenses in reaching the net profits break-even level changes inversely with price. As such, the underlying property production volume changes may not correlate with the trust’s net profit share of those volumes in any given period. Therefore, comparative discussion of oil and gas sales volumes is based on the underlying properties. [C] Production expense is primarily from seven working interest properties in the 75% net profits interest. Five of these properties are not operated by XTO Energy or ExxonMobil. Production expense includes an overhead charge which is deducted and retained by the operator. As of March 31, 2012, this charge was $34,184 per month (including monthly overhead charges of $2,638 which XTO Energy deducts as operator of the Penwell Unit and $4,507 which ExxonMobil deducts as operator of the Hewitt Unit) and is subject to adjustment each May based on an oil and gas industry index.


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    CROSS TIMBERS ROYALTY TRUST FIRST QUARTER REPORT 2012 TAX INFORMATION PER UNIT MONTHLY DISTRIBUTIONS PAID ON: ($/UNIT EXCEPT COST DEPLETION FACTORS) February 12, 2012 March 14, 2012 April 13, 2012 Total Gross Income.................................................................................... $ 0.318965 $ 0.263728 $ 0.258316 $ 0.841009 Less Severance Taxes ....................................................................... (0.040167) (0.036251) (0.035095) (0.111513) Interest Income ................................................................................ 0.000005 0.000005 0.000004 0.000014 Less Administration Expenses .......................................................... (0.010428) (0.007969) (0.002909) (0.021306) Net Cash Distribution .................................................................. $ 0.268375 $ 0.219513 $ 0.220316 $ 0.708204 Cost Depletion Factors: Texas - 90% ............................................................................. 0.010480 0.009456 0.010686 0.030622 Oklahoma - 90%...................................................................... 0.008059 0.010841 0.007861 0.026761 New Mexico - 90% ................................................................... 0.004468 0.004273 0.004882 0.013623 Texas - 75% ............................................................................. 0.006388 0.005156 0.000947 0.012491 Oklahoma - 75%...................................................................... 0.014039 0.007106 0.003489 0.024634 CROSS TIMBERS ROYALTY TRUST฀901฀Main฀Street,฀17th฀Floor,฀P.O.฀Box฀830650,฀Dallas,฀Texas฀75283-0650฀•฀(877)฀228-5084 U.S.฀Trust,฀Bank฀of฀America฀Private฀Wealth฀Management,฀Trustee฀•฀www.crosstimberstrust.com FIRST QUARTER REPORT 2012 CROSS TIMBERS ROYALTY TRUST


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