avatar Cross Timbers Royalty Trust Finance, Insurance, And Real Estate
  • Location: Texas 
  • Founded:
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    CROSS TIMBERS ROYALTY TRUST THIRD QUARTER REPORT 2013 TO UNITHOLDERS oil prices ($0.6 million), partially offset by increased oil For the quarter ended September 30, 2013, net profits income production ($0.4 million) and higher gas prices was $4,227,291 compared to $3,320,147 for third quarter 2012. ($0.2 million). See “Net Profits Income” on following page. This 27% increase in net profits income is primarily the result After considering interest income of $203 and administration of higher oil and gas prices ($1.2 million) and increased oil expense of $323,843, distributable income for the nine production ($0.3 million), partially offset by decreased gas months ended September 30, 2013 was $9,921,270, or production ($0.2 million), change in excess costs ($0.2 million) $1.653545 per unit of beneficial interest. Administrative and increased development costs ($0.1 million). See “Net expense for the nine months ended September 30, 2013 Profits Income” on the following page. increased $5,250 from the prior year nine-month period. For After considering interest income of $86 and administration the nine months ended September 30, 2012, distributable expense of $62,813, distributable income for the quarter income was $11,340,072, or $1.890012 per unit. ended September 30, 2013 was $4,164,564, or $0.694094 per Individualized tax information is provided annually to unit of beneficial interest. Administrative expense for the unitholders of record. Unitholders owning units in nominee quarter increased $10,192 from the prior year quarter. For name may obtain monthly tax information from the third quarter 2012, distributable income was $3,267,606, trustee upon request or from the trust’s website at www. or $0.544601 per unit. Distributions to unitholders for the crosstimberstrust.com. quarter ended September 30, 2013 were: This letter, and all communications to unitholders, includes RECORD DATE PAYMENT DATE PER UNIT information provided to the trustee by XTO Energy Inc. July 31, 2013 August 14, 2013 $ 0.202620 August 30, 2013 September 16, 2013 0.235695 Cross Timbers Royalty Trust September 30, 2013 October 15, 2013 0.255779 By: U.S. Trust, Bank of America $ 0.694094 Private Wealth Management, Trustee For the nine months ended September 30, 2013, net profits income was $10,244,910 compared to $11,658,423 for the same 2012 period. This 12% decrease in net profits income is primarily the result of increased development costs ($0.8 By: Nancy G. Willis million), decreased gas production ($0.6 million) and lower Vice President CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (Unaudited) THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30 2013 2012 2013 2012 Net Profits Income............................................. $ 4,227,291 $ 3,320,147 $10,244,910 $ 11,658,423 Interest Income ........................................................... 86 80 203 242 Total Income ...................................................... 4,227,377 3,320,227 10,245,113 11,658,665 Administration Expense ............................................. 62,813 52,621 323,843 318,593 Distributable Income ........................................ $ 4,164,564 $ 3,267,606 $ 9,921,270 $ 11,340,072 Distributable Income Per Unit (6,000,000 units) $ 0.694094 $ 0.544601 $ 1.653545 $ 1.890012 These condensed statements of distributable income should be read in conjunction with the financial statements and notes thereto included in the trust’s 2012 annual report. For further information, see the trust’s quarterly report on Form 10-Q for the quarter ended September 30, 2013. 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, 2012, 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 THIRD QUARTER REPORT 2013 Net Profits Income oil and gas production taxes and other deductions related to higher Net profits income is recorded when received by the trust, which oil and gas revenues. Taxes, transportation and other decreased is the month following receipt by XTO Energy and generally two 10% for the nine-month period primarily because of decreased oil months after oil production and three months after gas production. and gas production taxes and other deductions related to lower oil Net profits income is generally affected by three major factors: and gas revenues. ■ oil and gas sales volumes, Production Expense. Production expense increased 5% for the ■ oil and gas sales prices, and third quarter primarily because of increased power and fuel and ■ costs deducted in the calculation of net profits income. labor costs, partially offset by decreased outside operated and Because properties underlying the 90% net profits interests are field costs. Production expense increased 6% for the nine-month royalty and overriding royalty interests, the calculation of net profits period primarily because of increased power and fuel, non-operated income from these interests only includes deductions for production overhead and labor costs, partially offset by decreased repairs and and property taxes, legal costs, and marketing and transportation maintenance costs. charges. In addition to these costs, the calculation of net profits Development Costs. Development costs increased 27% for the third income from the 75% net profits interests includes deductions quarter and 97% for the nine-month period primarily because of for production expense and development costs since the related the timing of expenditures and increased activity and costs related underlying properties are working interests. to non-operated Texas and Oklahoma oil properties underlying the The following are explanations of significant variances on the underlying 75% net profits interest. properties from third quarter 2012 to third quarter 2013 and from the first nine months of 2012 to the comparable period in 2013: Excess Costs Lower oil prices in January 2013 and increased costs related to the Sales Volumes timing of cash expenditures in January and March 2013 caused Oil. Oil sales volumes increased 7% for third quarter 2013 and 4% costs to exceed revenues by a total of $148,300 ($111,225 net to for the first nine months of 2013 as compared with the same 2012 the trust) in January and March 2013 on properties underlying the periods primarily because of the timing of cash receipts, partially Texas working interest. XTO advised the trustee that increased offset by natural production decline. costs related to the timing of cash expenditures caused costs to exceed revenues by a total of $103,563 ($77,672 net to the trust) Gas. Gas sales volumes decreased 5% for third quarter 2013 and 7% in April 2013 on properties underlying the Texas working interest. for the first nine months of 2013 as compared with the same 2012 However, these excess costs did not reduce net proceeds from periods primarily because of the timing of cash receipts and natural the remaining conveyances. Decreased costs in February 2013 production decline, partially offset by increased production from and May 2013 and increased oil prices in June 2013 led to the new wells and workovers. partial recovery of excess costs, plus accrued interest, of $210,823 The estimated rate of natural production decline on the underlying ($158,117 net to the trust) on properties underlying the Texas oil and gas properties is approximately 6% to 8% a year. working interest. Increased oil prices and decreased costs led to the full recovery of excess costs, plus accrued interest, of $42,445 Sales Prices ($31,834 net to the trust) in third quarter 2013. There were no Oil. The average oil price increased 13% to $92.63 per Bbl for the excess costs remaining at September 30, 2013. third quarter and decreased 6% to $85.67 per Bbl for the nine-month Lower oil prices and increased production expenses related to the period. Oil prices are expected to remain volatile. The third quarter timing of cash disbursements caused costs to exceed revenues on 2013 oil price is primarily related to production from May through properties underlying the Texas working interest in August 2012 July 2013, when the average NYMEX price was $98.41 per Bbl. The by $218,168 ($163,626 net to the trust). However, these excess average NYMEX price for August and September 2013 was $106.52 costs did not reduce net proceeds from the remaining conveyances. per Bbl. At October 22, 2013, the average NYMEX futures price for XTO advised the trustee that increased oil prices and decreased the following twelve months was $96.67 per Bbl. production expenses led to the partial recovery of excess costs, plus accrued interest, on the properties underlying the Texas working Gas. Gas prices for the third quarter increased 37% to $6.72 per interest in September 2012. Remaining excess costs totaled Mcf and for the nine-month period increased 2% to $6.23 per Mcf. $171,978 ($128,984 net to the trust) at the end of third quarter 2012. Natural gas prices are affected by the level of North American production, weather, crude oil and natural gas liquids prices, the Contingencies U.S. economy, storage levels and import levels of liquefied natural Several states have enacted legislation requiring state income tax gas. Natural gas prices are expected to remain volatile. The third withholding from nonresident recipients of oil and gas proceeds. quarter 2013 gas price is primarily related to production from April After consultation with its tax counsel, the trustee believes that it through June 2013, when the average NYMEX price was $4.09 per is not required to withhold on payments made to the unitholders. MMBtu. The average NYMEX price for July through September 2013 However, regulations are subject to change by the various states, was $3.58 per MMBtu. At October 22, 2013, the average NYMEX which could change this conclusion. Should amounts be withheld futures price for the following twelve months was $3.78 per MMBtu. on payments made to the trust or the unitholders, distributions to the unitholders would be reduced by the required amount, subject Costs to the filing of a claim for refund by the trust or unitholders for such Taxes, Transportation and Other. Taxes, transportation and other amount. increased 16% for the third quarter primarily because of increased


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    CROSS TIMBERS ROYALTY TRUST THIRD QUARTER REPORT 2013 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 net profits income received by the trust: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 [A] INCREASE SEPTEMBER 30 [A] INCREASE 2013 2012 (DECREASE) 2013 2012 (DECREASE) Sales Volumes Oil (Bbl) [B] Underlying Properties ........................... 52,610 49,011 7% 150,569 144,813 4% Average Per Day............................. 572 533 7% 552 529 4% Net Profits Interests .............................. 24,422 21,797 12% 61,636 70,237 (12%) Gas (Mcf) [B] Underlying Properties ........................... 466,967 494,084 (5%) 1,230,628 1,329,077 (7%) Average Per Day............................. 5,132 5,429 (5%) 4,508 4,851 (7%) Net Profits Interests .............................. 408,904 433,141 (6%) 1,072,785 1,175,499 (9%) Average Sales Prices Oil (per Bbl) ................................................... $ 92.63 $ 81.86 13% $ 85.67 $ 90.74 (6%) Gas (per Mcf) ................................................. $ 6.72 $ 4.91 37% $ 6.23 $ 6.09 2% Revenues Oil sales ........................................................ $4,873,198 $ 4,012,023 21% $12,899,449 $ 13,139,885 (2%) Gas sales ........................................................ 3,138,774 2,425,653 29% 7,672,885 8,092,133 (5%) Total Revenues....................................... 8,011,972 6,437,676 24% 20,572,334 21,232,018 (3%) Costs Taxes, transportation and other ................... 1,088,750 941,308 16% 2,543,613 2,837,280 (10%) Production expense [C] ............................... 1,302,755 1,244,444 5% 4,199,068 3,960,869 6% Development costs......................................... 735,825 580,656 27% 2,109,070 1,068,006 97% Excess costs ................................................... 42,445 (171,978) (125%) 1,405 (171,978) (101%) Total Costs .............................................. 3,169,775 2,594,430 22% 8,853,156 7,694,177 15% Net Proceeds.................................................. $4,842,197 $3,843,246 26% $11,719,178 $ 13,537,841 (13%) Net Profits Income......................................... $4,227,291 $ 3,320,147 27% $10,244,910 $ 11,658,423 (12%) [A] Because of the interval between time of production and receipt of royalty income by the trust, (1) oil and gas sales for the quarter ended September 30 generally represent oil production for the period May through July and gas production for the period April through June and (2) oil and gas sales for the nine-months ended September 30 generally represent oil production for the period November through July and gas production for the period October through June. [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. Six 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 September 30, 2013, this charge was $35,947 per month (including monthly overhead charges of $5,135 which XTO Energy 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 THIRD QUARTER REPORT 2013 TAX INFORMATION PER UNIT MONTHLY DISTRIBUTIONS PAID ON: ($/UNIT EXCEPT COST DEPLETION FACTORS) August 14, 2013 September 16, 2013 October 15, 2013 Total Gross Income.................................................................................. $ 0.238235 $ 0.286562 $ 0.307216 $ 0.832013 Less Severance Taxes .................................................................... (0.033727) (0.044030) (0.049707) (0.127464) Interest Income .............................................................................. 0.000005 0.000004 0.000006 0.000015 Less Administration Expenses...................................................... (0.001893) (0.006841) (0.001736) (0.010470) Net Cash Distribution ............................................................... $ 0.202620 $ 0.235695 $ 0.255779 $ 0.694094 Cost Depletion Factors: Texas - 90% ............................................................................ 0.011974 0.011259 0.011821 0.035054 Oklahoma - 90% ..................................................................... 0.009885 0.013016 0.020838 0.043739 New Mexico - 90% ................................................................. 0.004951 0.005606 0.005857 0.016414 Texas - 75% ............................................................................ 0.000000 0.002840 0.005861 0.008701 Oklahoma - 75% ..................................................................... 0.006743 0.005095 0.005755 0.017593 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 THIRD QUARTER REPORT 2013 CROSS TIMBERS ROYALTY TRUST


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