SABINE ROYALTY TRUST - 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1997. Sabine Royalty Trust is a passive trust established to hold royalty and mineral interests in oil and gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas. The Trust makes monthly cash distributions to unit holders from the proceeds of production. As of May 10, 1997, there were 14,579,345 units of beneficial interest outstanding.
Key Financial Metrics
| Metric | Q1 1997 | Q1 1996 |
|---|---|---|
| Royalty Income | $7,440,234 | $5,170,562 |
| Interest Income | $41,797 | $33,158 |
| Total Income | $7,482,031 | $5,203,720 |
| General & Administrative Expenses | ($363,612) | ($341,440) |
| Distributable Income | $7,118,419 | $4,862,280 |
| Distributable Income Per Unit | $0.49 | $0.33 |
| Total Distributions Paid | $6,914,891 | $3,986,143 |
| Distributions Per Unit | $0.47 | $0.27 |
Liquidity and Assets: Cash and short-term investments totaled $3,512,344 as of March 31, 1997, compared to $3,321,724 at December 31, 1996. Total assets were $6,929,645. The Trust holds no long-term debt; borrowings are permitted only to pay liabilities and must be repaid before further distributions.
Material Changes vs. Prior Period
- Revenue Growth: Royalty income increased by approximately $2.27 million (44%) compared to the first quarter of 1996. This was primarily driven by a significant increase in oil and gas prices.
- Price vs. Volume: While average oil prices rose from $13.89 to $20.68 per barrel and gas prices from $1.77 to $2.90 per Mcf, production volumes actually decreased. Oil production fell from 187,180 to 150,880 barrels, and gas production fell from 1,727,204 to 1,638,605 Mcfs.
- Expenses: General and administrative expenses increased by approximately $22,200 year-over-year due to the timing of professional fees for year-end reporting.
Outlook, Risks, and Commentary
Management Commentary: The Trustee notes that the increase in royalty income was due to higher commodity prices and, compared to the prior quarter, an increase in production volumes and gas prices. The Trustee does not anticipate the need for borrowings in the foreseeable future.
Risks and Uncertainties: The filing includes forward-looking statements subject to risks outside the Trustee's control. Key risks include the difficulty of accurately estimating future oil and gas prices, general economic conditions, and actions by petroleum-producing nations. The Trustee explicitly states that assumptions concerning future prices may prove incorrect.
Subsequent Events: Following the quarter end, the Trust declared distributions of $0.14383 per unit (April record date) and $0.19078 per unit (May record date).
Investor Verification Checklist
- Commodity Price Sensitivity: Verify current oil and gas prices against the Q1 1997 averages ($20.68/bbl oil, $2.90/Mcf gas) to assess future income potential, as revenue is highly price-dependent.
- Production Decline: Confirm current production volumes, noting the year-over-year decline in both oil and gas output despite higher prices.
- Amortization Impact: Review the amortization of royalty interests ($129,737 for the quarter), which reduces Trust Corpus but is not an operating expense charge.
- Escrow Timing: Understand that income is recognized when received by the Trust or escrow agents, which may cause distributable income to lag or lead production timing.