[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
[ ] Transition report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934
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 ___
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ___ No ___
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer," "smaller
reporting company" and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of
the Exchange Act
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No
X
Item 1.
Financial Statements.
STATEMENTS OF ASSETS, LIABILITIES
AND TRUST CORPUS (NOTE 1)
JANUARY 31, 2019 AND OCTOBER 31, 2018
(Unaudited)
|
2019
|
2018
|
ASSETS
|
|
|
Current assets --
Cash and cash equivalents
|
$2,116,403
|
$1,457,207
|
|
Producing gas and oil royalty rights,
net of amortization (Notes 1 and 2)
|
1
|
1
|
|
Total Assets
|
$2,116,404
|
$1,457,208
|
|
|
LIABILITIES AND TRUST CORPUS
|
|
|
Current liabilities -- Distributions
to be paid to unit owners,
paid February 2019 and November 2018
|
$2,021,930
|
$1,378,589
|
|
Trust corpus (Notes 1 and 2)
|
1
|
1
|
|
Undistributed earnings
|
94,473
|
78,618
|
|
Total Liabilities and
Trust Corpus
|
$2,116,404
|
$1,457,208
|
The accompanying notes are an integral part
of these financial statements.
STATEMENTS OF REVENUE COLLECTED
AND EXPENSES PAID (NOTE 1)
FOR THE THREE MONTHS ENDED JANUARY 31, 2019
AND 2018
(Unaudited)
|
2019
|
2018
|
Gas, sulfur and oil royalties received
|
$2,303,000
|
$1,770,241
|
Interest income
|
2,386
|
1,471
|
Trust Income
|
$2,305,386
|
$1,771,712
|
|
Non-related party expenses
|
(238,445)
|
(248,454)
|
Related party expenses (Note 3)
|
(29,156)
|
(28,172)
|
Trust Expenses
|
(267,601)
|
(276,626)
|
|
Net Income
|
$2,037,785
|
$1,495,086
|
|
Net income per unit
|
$0.22
|
$0.16
|
Distributions per unit paid or
to be paid to unit owners
|
$0.22
|
$0.17
|
The accompanying notes are an integral part
of these financial statements.
STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1)
FOR THE THREE MONTHS ENDED JANUARY 31, 2019 AND
2018
(Unaudited)
|
2019
|
2018
|
Balance, beginning of period
|
$78,618
|
$104,076
|
Net income
|
2,037,785
|
1,495,086
|
|
2,116,403
|
1,599,162
|
Less:
|
|
|
Current year distributions
paid or to be paid to unit owners
|
2,021,930
|
1,562,400
|
Balance, end of period
|
$94,473
|
$36,762
|
The accompanying notes are an integral part
of these financial statements.
STATEMENTS OF CHANGES IN CASH
AND CASH EQUIVALENTS (NOTE 1)
FOR THE THREE MONTHS ENDED
JANUARY 31, 2019 AND 2018
(Unaudited)
|
2019
|
2018
|
Sources of Cash and Cash
Equivalents:
|
|
|
Gas, sulfur and oil royalties received
|
$2,303,000
|
$1,770,241
|
Interest income
|
2,386
|
1,471
|
|
2,305,386
|
1,771,712
|
Uses of Cash and Cash
Equivalents:
|
|
|
Payment of Trust expenses
|
267,601
|
276,626
|
Distributions paid
|
1,378,589
|
2,021,929
|
|
1,646,190
|
2,298,555
|
Net increase (decrease) in cash and
cash equivalents during the period
|
659,196
|
(526,843)
|
Cash and cash equivalents,
beginning of period
|
1,457,207
|
2,126,005
|
Cash and cash equivalents,
end of period
|
$2,116,403
|
$1,599,162
|
The accompanying notes are an integral part
of these financial statements.
NORTH EUROPEAN OIL
ROYALTY TRUST
NOTES TO FINANCIAL
STATEMENTS
(Unaudited)
(1)
Summary of significant accounting
policies:
Basis of accounting -
The accompanying financial
statements of North European Oil Royalty Trust (the "Trust") are prepared
in accordance with the rules and regulations of the
SEC. Financial statement balances and financial results are
presented on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than accounting principles
generally accepted in the United States ("GAAP basis"). In the opinion
of management, all adjustments that are considered necessary for a fair
presentation of these financial statements, including adjustments of a
normal, recurring nature, have been included.
On a modified cash basis,
revenue is earned when cash is received and expenses are incurred
when cash is paid. GAAP basis financial statements
disclose revenue as earned and expenses as incurred, without regard to
receipts or payments. The modified cash basis of accounting is utilized
to permit the accrual for distributions to be paid to unit owners (those
distributions approved by the Trustees for the Trust). The Trust's
distributable income represents royalty income received by the Trust
during the period plus interest income less any expenses incurred by the
Trust, all on a cash basis. In the opinion of the Trustees, the use of
the modified cash basis of accounting provides a more meaningful
presentation to unit owners of the results of operations of the
Trust.
The results of any interim
period are not necessarily indicative of the results to be expected
for the fiscal year. These financial statements should be read in
conjunction with the financial statements that were included in the
Trust's Annual Report on Form 10-K for the year ended October 31, 2018
(the "2018 Form 10-K"). The Statements of Assets, Liabilities and
Trust Corpus included herein contain information from the Trust's
2018 Form 10-K.
Producing gas and oil
royalty rights -
The rights to certain gas
and oil royalties in Germany were transferred to the Trust at their
net book value by North European Oil Company (the "Company") (see
Note 2). The net book value of the royalty rights has been reduced to
one dollar ($1) in view of the fact that the remaining net book value
of royalty rights is de minimis relative to annual royalties received
and distributed by the Trust and does not bear any meaningful
relationship to the fair value of such rights or the actual amount
of proved producing reserves.
Federal and state
income taxes -
The Trust, as a grantor trust,
is exempt from federal income taxes under a private letter ruling
issued by the Internal Revenue Service. The Trust has no state income
tax obligations.
Cash and cash equivalents -
Cash and cash equivalents are
defined as amounts deposited in bank accounts and amounts invested in
certificates of deposit and U. S. Treasury bills with original
maturities generally of three months or less from the date of
purchase. The investment options available to the Trust are limited
in accordance with specific provisions of the Trust Agreement. As of
January 31, 2019, the uninsured amount held in the Trust's U.S. bank
accounts was $1,860,826. In addition, the Trust held Euros 4,870, the
equivalent of $5,577, in its German bank account at January 31,
2019.
Net income per unit -
Net income per unit is
based upon the number of units outstanding at the end of the period.
As of both January 31, 2019 and 2018, there were 9,190,590 units of
beneficial interest outstanding.
New accounting
pronouncements -
The Trust is not aware of any
recently issued, but not yet effective,
accounting standards that would be expected to have a significant impact
on the Trust's financial position or results of operations.
(2)
Formation of the Trust:
The Trust was formed on
September 10, 1975. As of September 30, 1975, the Company was
liquidated and the remaining assets and liabilities of the
Company, including its royalty rights, were transferred to the Trust. The
Trust, on behalf of the owners of beneficial interest in the Trust, holds
overriding royalty rights covering gas and oil production in certain
concessions or leases in the Federal Republic of Germany. These rights
are held under contracts with local German exploration and development
subsidiaries of ExxonMobil Corporation and the Royal Dutch/Shell Group of
Companies. Under these contracts, the Trust receives various percentage
royalties on the proceeds of the sales of certain products from the
areas involved. At the present time, royalties are received for sales
of gas well gas, oil well gas, crude oil, condensate and sulfur.
(3)
Related party transactions:
John R. Van Kirk, the
Managing Director of the Trust, provides office space and office
services to the Trust at cost. For such office space and office
services, the Trust reimbursed the Managing Director $8,618 and $5,735
in the first quarter of fiscal 2019 and 2018, respectively. The
upcoming shift to a virtual office in 2019 should substantially reduce
the expenses that would be associated with maintaining a physical
office.
Lawrence A. Kobrin, a
Trustee of the Trust, is a Senior Counsel at Cahill Gordon
& Reindel LLP, which serves as counsel to the Trust. For the first
quarter of fiscal 2019 and 2018, the Trust paid Cahill Gordon &
Reindel LLP $20,538 and $22,437 for legal services, respectively.
(4)
Employee benefit plan:
The Trust has established a
savings incentive match plan for employees (SIMPLE IRA) that is
available to both employees of the Trust, one of whom is the Managing
Director. The Trustees have authorized the Trust to make contributions
to the accounts of the employees, on a matching basis, of up to 3% of
cash compensation paid to each employee effective for the 2019 and
2018 calendar years.
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of
Operations.
Executive Summary
The Trust is a passive fixed
investment trust which holds overriding royalty rights, receives income
under those rights from certain operating companies, pays its expenses and
distributes the remaining net funds to its unit owners. As mandated by
the Trust Agreement, distributions of income are made on a quarterly
basis. These distributions, as determined by the Trustees, constitute
substantially all of the funds on hand after provision is made for Trust
expenses then anticipated.
The Trust does not engage
in any business or extractive operations of any kind in the areas over
which it holds royalty rights and is precluded from engaging in such
activities by the Trust Agreement. There are no requirements,
therefore, for capital resources with which to make capital expenditures
or investments in order to continue the receipt of royalty revenues by
the Trust.
The properties of the Trust,
which the Trust and Trustees hold pursuant to the Trust Agreement on
behalf of the unit owners, are overriding royalty rights on sales of
gas, sulfur and oil under certain concessions or leases in the Federal
Republic of Germany. The actual leases or concessions are held either
by Mobil Erdgas-Erdol GmbH ("Mobil Erdgas"), a German operating
subsidiary of the ExxonMobil Corporation ("ExxonMobil"), or by
Oldenburgische Erdolgesellschaft ("OEG"). The Oldenburg concession
is the primary area from which the natural gas, sulfur and oil are
extracted and currently provides 100% of all the royalties received
by the Trust. The Oldenburg concession (approximately 1,386,000 acres)
covers virtually the entire former Grand Duchy of Oldenburg and is
located in the German federal state of Lower Saxony.
In 2002, Mobil Erdgas and
BEB Erdgas und Erdol GmbH ("BEB"), a joint venture of ExxonMobil and
the Royal Dutch/Shell Group of Companies, formed a company,
ExxonMobil Production Deutschland GmbH ("EMPG"), to carry out all
exploration, drilling and production activities. All sales
activities are still handled by the operating companies, either
Mobil Erdgas or BEB.
Vermilion Energy Inc.
("Vermilion"), a Canadian based international oil and gas producer,
entered into a Farm-In Agreement (the "Farm-In Agreement") with Mobil
Erdgas and BEB effective as of January 1, 2016. The Trust has been
advised by its consultant in Germany that, based on conversations with
people at EMPG and other sources, the Farm-In Agreement specifies that
Vermilion has acquired an interest in various portions of a concession
or areas owned by Mobil Erdgas and BEB. Three of these licenses cover
the three northernmost areas of the Oldenburg concession. The Farm-In
Agreement commits Vermilion to financial participation at a 50% level
in 11 gross exploratory wells over the next five years. Three of these
wells will be drilled in areas subject to the Trust's royalties. If a
well in the area subject to the Trust's royalties is a discovery,
Vermilion's participation in the production and sale will be 50%.
Vermilion's participation in the development of any well does not impact
the Trust's royalty interest and the sale of that gas or oil would be
subject to the relevant royalty contract. Based upon statements from
EMPG to the Trust's consultant, Vermilion will lead the development of
its first well within the Oldenburg concession with a possible start
time in 2020. The planned well-site is located in the western portion
of the area designated Oldenburg-Land, the southernmost area of the
three areas within the concession subject to Vermilion's Farm-In
Agreement. Vermilion's well is intended to develop the Rotliegend
(Red Sandstone) formation, a previously undeveloped productive zone
within the concession. Additionally, according to EMPG and in
accordance with the terms of the Farm-In Agreement, Vermilion will
drill two other wells within the Oldenburg concession, one in Jeverland
and one in Jade-Weser. No details concerning these wells or any other
activities by Vermilion are available to the Trust at this date and
Vermilion is under no obligation to disclose such information.
The operating companies pay
monthly royalties to the Trust based on their sales of natural gas,
sulfur and oil. Of these three products, natural gas provided
approximately 92% of the cumulative royalty income received in fiscal
2019. The amount of royalties paid to the Trust is primarily based on
four factors: the amount of gas sold, the price of that gas, the area
from which the gas is sold, and the exchange rate.
On approximately the 25th
of the months of January, April, July and October, the operating
companies calculate the amount of gas sold during the previous
calendar quarter and determine the amount of royalties that were
payable to the Trust based on those sales. This amount is divided
into thirds and forms the monthly royalty payments (payable on the
15th of each month) to the Trust for its upcoming fiscal quarter. At
the same time that the operating companies determine the actual amount
of royalties that were payable for the prior calendar quarter, they
look at the actual amount of royalties that were paid to the Trust
for that period and calculate the difference between what was paid
and what was payable. Additional amounts payable by the operating
companies would be paid immediately and any overpayment would be
deducted from the payment for the first month of the following
fiscal quarter. In September of each year, the operating companies
make the final determination of any necessary royalty adjustments for
the prior calendar year with a positive or negative adjustment made
accordingly. Currently, the Trust's German accountants review the
royalty calculations on a biennial basis. They will begin their
examination of the operating companies for 2017-2018 in November
2019 when the final sales figures will be available.
There are two types of
natural gas found within the Oldenburg concession, sweet gas and
sour gas. Sweet gas has little or no contaminants and needs no
treatment before it can be sold. Sour gas, in comparison, must be
processed at the Grossenkneten desulfurization plant before it can
be sold. The desulfurization process removes hydrogen sulfide and
other contaminants. The hydrogen sulfide in gaseous form is converted
to sulfur in a solid form and sold separately. As needed, EMPG
conducts maintenance on the plant generally during the summer months
when demand is lower. The operating companies informed the Trust
that, to promote greater efficiency and cost effectiveness, the
production capacity of Grossenkneten was reduced by approximately
one-third through the retirement of Unit 3 in April 2017. With full
operation of the two remaining units, raw gas input capacity stands
at approximately 400 million cubic feet ("MMcf") per day.
While originally EMPG had
indicated there would be no maintenance conducted during 2018, one
of the two units was shut down from March 15 to April 15, 2018. A
second unexpected shutdown for both of the units followed for the
period from May 18 to June 10, 2018. This shutdown was related to
an emissions control issue. While the repairs to address the
emissions problem were being conducted, additional problems with a
waste heat boiler were discovered in one of the units. Repairs to
address these newly discovered problems continued from June 10 to
August 21, 2018. During this period, the total throughput capacity
was reduced by 40%. As of August 22, 2018, full production capacity
at Grossenkneten had been restored.
Under one set of rights
covering the western part of the Oldenburg concession (approximately
662,000 acres), the Trust receives a royalty payment of 4% on gross
receipts from sales by Mobil Erdgas of gas well gas, oil well gas,
crude oil and condensate (the "Mobil Agreement"). Under the Mobil
Agreement, there is no deduction of costs prior to the calculation of
royalties from gas well gas and oil well gas, which together accounted
for approximately 97% of the cumulative royalty income received under
this agreement in fiscal 2019. Historically, the Trust has received
significantly greater royalty payments under the Mobil Agreement, as
compared to the OEG Agreement described below, due to the higher
royalty rate specified by that agreement.
The Trust is also entitled
under the Mobil Sulfur Agreement to receive a 2% royalty on gross
receipts of sales of sulfur obtained as a by-product of sour gas
produced from the western part of Oldenburg. The payment of the
sulfur royalty is conditioned upon sales of sulfur by Mobil Erdgas
at a selling price above an agreed upon base price. This base price
is adjusted annually by an inflation index. In the first quarter of
fiscal 2019, the Trust received $54,796 in sulfur royalties under
this agreement. In the first quarter of fiscal 2018, the Trust
received no sulfur royalties under this agreement.
Under another set of rights
covering the entire Oldenburg concession and pursuant to the agreement
with OEG, the Trust receives royalties at the rate of 0.6667% on gross
receipts from sales by BEB of gas well gas, oil well gas, crude oil,
condensate and sulfur (removed during the processing of sour gas) less
a certain allowed deduction of costs (the "OEG Agreement"). Under the
OEG Agreement, 50% of the field handling and treatment costs, as
reported for state royalty purposes, are deducted from the gross sales
receipts prior to the calculation of the royalty to be paid to the
Trust.
In addition to the Oldenburg
area, the Trust also holds overriding royalties at various rates on a
number of currently non-producing leases of various sizes in other
areas of Germany. One of these leases, Grosses Meer, was formerly
active but provided no royalties during fiscal 2018, 2017 and 2016.
Vermilion is scheduled to participate in a new well to be drilled in an
area which includes the Grosses Meer field as well as other non-royalty
areas. However, no details are available at this date, and it is
unknown if the well will be sited within the area subject to the
Trust's royalty interest.
On August 26, 2016, the Trust
executed amendments to its existing royalty agreements with OEG and Mobil
establishing a new base for the determination of gas prices upon which the
Trust's royalties are determined. This new base is set as the state
assessment base for natural gas used by the operating companies in their
calculation of royalties payable to the State of Lower Saxony.
This change reflects a shift from the use of gas ex-field
prices ("contractual prices") to the prices calculated for the German
Border Import gas Price ("GBIP"). For simplification purposes, we will
use "GBIP" when referring to the current state assessment base.
The change to the GBIP is
intended to be revenue neutral for the Trust. Additionally, this change
should reduce the scope and cost of the accounting examination,
eliminate ongoing disputes with OEG and Mobil regarding sales to
related parties, and reduce prior year adjustments to the normally
scheduled year-end reconciliation. The new pricing basis also
eliminates certain costs (transportation and plant gas storage), one
half of which were previously deductible prior to the royalty
calculation under the agreement with OEG.
Actual gas sales from the
prior calendar quarter are multiplied by the average GBIP for a
period starting two months earlier and provide the basis for
royalty payments to the Trust during its fiscal quarter. The average
GBIP for the corresponding period of actual sales is not available due
to the delay in its calculation. As of the start of calendar 2016,
the average GBIP under the Mobil and OEG Royalty Agreements was and
will continue to be increased by 1% and 3%, respectively.
In March of the following
calendar year, an average GBIP for the prior calendar year (weighted on
a monthly basis by the respective volume of imported gas) is published.
In September of the following calendar year, EMPG makes a final
reconciliation based upon the published yearly average GBIP increased by
the respective percentage factor and the total volume of gas sold under
the royalty agreements during the prior calendar year. Required
additions to royalty amounts already paid are paid immediately.
Required deductions from royalty amounts already paid are deducted from
the next royalty payment due.
The new basis for oil prices
is the published price from the State Authority for Mining,
Energy and Geology. There are no percentage adjustments factored into
the oil royalty calculation. There is no change in the previous
methodology used with regard to the determination of royalties
attributable to sales of sulfur.
The Trust itself does not
have access to the specific sales contracts under which gas from the
Oldenburg concession is sold. However, working under a
confidentiality agreement with the operating companies, the Trust's
German accountants will confirm that the volume of gas sales
corresponds to the amount reported under the sales contracts and that
the weighted GBIP was properly calculated and applied in the
calculation of royalties payable to the Trust. In November 2019,
the Trust's accountants in Germany will begin their examination of
the royalty calculations by the operating companies for the 2017 and
2018 period.
For unit owners, changes
in the dollar value of the Euro have an immediate impact. This impact
occurs at the time the royalties, which are paid to the Trust in Euros,
are converted into U.S. dollars at the applicable exchange rate and
transferred from Germany to the United States. In relation to the
dollar, a stronger Euro would yield more dollars and a weaker Euro
would yield less dollars.
Seasonal demand factors affect
the income from the Trust's royalty rights insofar as they relate to
energy demands and increases or decreases in prices, but on average they
are generally not material to the annual income received under the
Trust's royalty rights.
The Trust has no means of
ensuring continued income from overriding royalty rights at their
present level or otherwise. The Trust's consultant in Germany provides
general information to the Trust on the German and European economies
and energy markets. This information provides a context in which to
evaluate the actions of the operating companies. The Trust's
consultant receives reports from EMPG with respect to current and
planned drilling and exploration efforts. However, EMPG and the
operating companies continue to limit the information flow to that
which is required by German law.
The low level of
administrative expenses of the Trust limits the effect of inflation
on costs. Sustained price inflation would be reflected in sales
prices. Sales prices along with sales volumes form the basis on which
the royalties paid to the Trust are computed.
.
Results: First Quarter of Fiscal 2019 versus
First Quarter of Fiscal 2018
Total royalty income
received during the first quarter of fiscal 2019 was derived from
sales of gas, sulfur and oil from the Trust's overriding royalty areas
in Germany during the fourth calendar quarter of 2018. The
distribution of $0.22 per unit will be paid on February 27, 2019 to
owners of record as of February 15, 2019. Comparisons of total
royalty income and net income for the first quarter of fiscal 2019
and 2018 are shown below.
|
1st Fiscal Quarter
Ended 1/31/2019
|
1st Fiscal Quarter
Ended 1/31/2018
|
Percentage Change
|
Total Royalty Income
|
$2,303,000
|
$1,770,241
|
+30.10%
|
Net Income
|
$2,037,785
|
$1,495,086
|
+36.30%
|
Distributions per Unit
|
$0.22
|
$0.17
|
+29.41%
|
The increase in total
royalty income between the first quarter of fiscal 2019 and the
first quarter of fiscal 2018 resulted from the higher gas prices
under both the Mobil and OEG Agreements. The impact of these higher
gas prices was somewhat mitigated by lower average exchange rates
and lower gas sales.
Total royalty income also
reflects the inclusion of various positive and negative adjustments
that the operators made during the quarter, including corrections
from prior periods, as well as the inclusion of Mobil sulfur
royalties. In the first quarter of fiscal 2019, there were no
negative adjustments and Mobil sulfur royalties amounted to $54,796.
By comparison, in the first quarter of fiscal 2018 total royalties
received were reduced by $129,582 in negative adjustments and no
Mobil sulfur royalties were received.
The table below is intended
to illustrate trends based on actual gas sales in each quarter. Gas
royalties shown in the table below are determined based on the actual
physical gas sales that occurred during the fourth calendar quarter of
2018 and the average German Border Import gas Price for the period of
August through October 2018. No adjustments for prior periods are
reflected in the gas royalties.
Quarterly Gas Data Providing Basis for Fiscal
Quarter Royalties
Mobil Agreement
|
4th Calendar
Quarter Ended
12/31/2018
|
4th Calendar
Quarter Ended
12/31/2017
|
Percentage
Change
|
Gas Sales (Bcf
1
)
|
5.535
|
5.660
|
- 2.21%
|
Gas Prices
2
(Ecents/Kwh
3
)
|
2.0582
|
1.6593
|
+24.04%
|
Average Exchange Rate
4
|
1.1349
|
1.1965
|
- 5.15%
|
Gas Royalties
|
$1,484,635
|
$1,278,038
|
+16.17%
|
Gas Prices ($/Mcf
5
)
|
$6.71
|
$5.65
|
+18.76%
|
|
OEG Agreement
|
Gas Sales (Bcf)
|
17.536
|
18.150
|
- 3.38%
|
Gas Prices (Ecents/Kwh)
|
2.0989
|
1.6921
|
+24.04%
|
Average Exchange Rate
|
1.1352
|
1.2008
|
- 5.46%
|
Gas Royalties
|
$649,180
|
$540,669
|
+ 20.07%
|
Gas Prices ($/Mcf)
|
$6.66
|
$5.69
|
+17.05%
|
Footnotes
|
1. Billion cubic
feet
|
2. Gas prices
derived from August-October period
|
3. Euro cents per
kilowatt hour
|
4. Based on average
Euro/dollar exchange rates of cumulative royalty transfers
|
5. Dollars per
thousand cubic feet
|
Excluding the effects of
differences in prices and average exchange rates, the combination of
royalty rates on gas sold from western Oldenburg results in an
effective royalty rate approximately seven times higher than the
royalty rate on gas sold from eastern Oldenburg. This is of particular
significance to the Trust since gas sold from western Oldenburg
provides the bulk of royalties paid to the Trust. For the first
quarter of fiscal 2019, gas sales from western Oldenburg accounted for
only 31.56% of all gas sales from the Oldenburg concession. However,
royalties on these gas sales provided approximately 79.11% or
$1,682,206 out of a total of $2,126,495 in Oldenburg royalties
attributable to gas.
Trust expenses for the
first quarter of fiscal 2019 decreased 3.26% or $9,025 to $267,601
from $276,626 for the first quarter of fiscal 2018. The decrease in
expenses reflects shifts in the timing of payments relating to both
the biennial examination of the royalty statements by the Trust's
German accountants and the work done by the Trust's petroleum
consultant, Graves & Co. Consulting LLC. Trust interest income
received in the first quarter of fiscal 2019 was $2,386, an increase
from interest income of $1,471 received in the first quarter of
fiscal 2018 due to increased funds available and higher interest rates
in effect.
The current Statements of
Assets, Liabilities and Trust Corpus of the Trust at January 31,
2019, compared to that at fiscal year-end (October 31, 2018), shows
an increase in assets due to higher royalty receipts during the first
quarter of fiscal 2019.
This report on Form 10-Q may
contain forward-looking statements intended to qualify for the safe
harbor from liability established by the Private Securities Litigation
Reform Act of 1995. Such statements address future expectations and
events or conditions concerning the Trust. Many of these statements
are based on information provided to the Trust by the operating
companies or by consultants using public information sources. These
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated in
any forward-looking statements. These include:
-
risks and uncertainties
concerning levels of gas production and gas sale prices,
general economic conditions and currency exchange
rates;
- the ability or willingness of the
operating companies to perform under their contractual
obligations with the Trust;
- potential disputes with the operating
companies and the resolution thereof; and
- the risk factors set forth under
Item 1A of the Trust's Annual Report on Form 10-K for the
year ended October 31, 2018.
All such factors are difficult
to predict, contain uncertainties that may materially affect actual
results, and are generally beyond the control of the Trust. New factors
emerge from time to time and it is not possible for the Trust to predict
all such factors or to assess the impact of each such factor on the
Trust. Any forward-looking statement speaks only as of the date on
which such statement is made, and the Trust does not undertake any
obligation to update any forward-looking statement to reflect events
or circumstances after the date on which such statement is made.