Sabine Royalty Trust 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1996. 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 distributes monthly cash payments to unit holders derived from production revenues. As of May 10, 1996, there were 14,579,345 units of beneficial interest outstanding.
Key Financial Metrics
| Metric | Q1 1996 | Q1 1995 |
|---|---|---|
| Royalty Income | $5,170,562 | $4,297,222 |
| Interest Income | $33,158 | $25,447 |
| Total Income | $5,203,720 | $4,322,669 |
| General & Administrative Expenses | ($341,440) | ($355,507) |
| Distributable Income | $4,862,280 | $3,967,162 |
| Distributable Income Per Unit | $0.33 | $0.27 |
| Total Distributions Paid | $3,986,143 | $3,953,764 |
| Distributions Per Unit | $0.27 | $0.27 |
| Cash and Short-Term Investments | $2,830,694 | N/A |
| Trust Corpus (Net Assets) | $6,155,969 | N/A |
Note: The filing does not provide specific debt figures; the Trustee states borrowings are not anticipated in the foreseeable future.
Material Changes vs. Prior Period
- Revenue Growth: Royalty income increased by approximately $873,000 (20%) compared to Q1 1995. This was driven by higher oil and gas production volumes and increased gas prices.
- Production Volumes: Oil production rose to 187,180 barrels (from 138,338 in Q1 1995), and gas production increased to 1,727,204 Mcfs (from 1,402,025 in Q1 1995).
- Price Trends: Average oil price per barrel decreased to $13.89 from $15.32 in Q1 1995, while average gas price per Mcf increased to $1.77 from $1.61.
- Expenses: General and administrative expenses decreased by approximately $14,100 compared to Q1 1995, primarily due to the timing of professional fee payments.
- Interest Income: Increased by approximately $7,700 due to slightly higher short-term interest rates.
Outlook, Risks, and Management Commentary
- Future Distributions: Subsequent to March 31, 1996, the Trust declared distributions of $0.11751 per unit (April record date) and $0.12000 per unit (May record date).
- Price Volatility Risk: Management notes that it continues to be difficult to accurately estimate future oil and gas prices, and assumptions regarding future prices may prove incorrect.
- Accounting Basis: Financial statements are prepared on a modified cash basis, not GAAP. Royalty income is recognized when received, not when produced.
- Liquidity: The Trust maintains cash reserves and short-term investments. Borrowing is permitted but not currently anticipated.
- Contingencies: "Other payables" of $464,637 consist primarily of royalty receipts suspended pending verification of ownership or title, which the Trustee expects to resolve in the normal course of business.
Key Facts for Investor Verification
- Verify the correlation between current oil/gas market prices and the Trust's production volumes to assess future distributable income.
- Confirm the status of the $464,637 in "other payables" to ensure no significant title disputes are delaying cash flow.
- Monitor the amortization of royalty interests ($167,310 for the quarter), which reduces the Trust Corpus over time as reserves are depleted.
- Review the monthly distribution schedule, as distributable income for a quarter often approximates distributions made in the last two months of the quarter and the first month of the next.