TROY, MI (Accesswire - October 9, 2013) -
On June 6, 2013, Roger D. Parsons, was formally elected as trustee (the "Trustee") of the LL&E Royalty Trust (the "Trust").
On September 18, 2013, the Trustee met with a team from Quantum Resources Management LLC ("Quantum" or the "Working Interest Owner"), the operator and partner to the Trust in the NPI assets held in the Jay Field, in Houston. The purpose of the meeting was primarily to understand the lack of cash flow distributions to the Trust from the Jay Field asset and to inform Quantum that the Trustee will be conducting a new independent joint interest audit starting in the fourth quarter of 2013.
The Conveyances provide that under certain circumstances the Working Interest Owners may place all or a portion of the revenues which would otherwise accrue to the Royalties in an escrow account rather than treating such revenues as Gross Proceeds. In particular, with respect to any Productive Property, if, at the end of any month, (a) the aggregate estimated future Gross Proceeds (as defined in the Conveyances), as estimated by independent petroleum engineers in their most current report, is less than (b) the sum of (i) estimated future Production Costs (as defined in the Conveyances), as estimated by the Working Interest Owner, excluding certain costs, and (ii) 400% of the aggregate estimated future Special Costs (as defined in the Conveyances), the Working Interest Owner may escrow an amount equal to a certain percentage (the calculation of which is described below) of the revenues which would otherwise constitute Gross Proceeds. The phrase "Gross Proceeds", as used in the Conveyances, and subject to certain exceptions, means, on an accrual accounting method, the amount recorded as revenues by the Working Interest Owner from the sale of oil, gas and certain other hydrocarbons from a given Productive Property. The phrase "Production Costs", as used in the Conveyances, includes lease operating expenses, overhead and taxes. The phrase "Special Costs", as used in the Conveyances, includes, among other things: (a) the aggregate estimated cost of plugging and abandoning wells and dismantling platforms on such Productive Property, and (b) estimated future capital expenditures. The amount the Working Interest Owner may place in escrow with respect to any Productive Property in any month may not exceed Gross Proceeds for that month multiplied by 250 percent of the aggregate estimated future Special Costs divided by the aggregate estimated future Gross Proceeds for that Property. Further, if the total amount so escrowed exceeds 125 percent of the aggregate estimated future Special Costs for the particular Productive Property, no additional amounts may be escrowed until the escrowed funds are less than 125 percent of such amount.
As of the most recent unaudited August 2013 accounting period provided by Quantum for specifically the Jay Field asset, the total future Aggregate Estimated Future Gross Proceeds amount was $313,728,612, the future Estimated Future Production Costs amount was $212,341,417 and the future Capital Expenditures amount was $25,949,066. The Future Special Costs estimate amount was $36,239,092. The escrow balance specific to the Jay field was $35,697,830. The Trust’s interest in the Jay Field is equivalent to 50% of these figures per the Conveyances.
As previously reported, the unaudited escrow balance specific to the Jay field at December 31, 2010, was $4,543,402, which has since increased by $31,154,428 (in the eight months year-to-date 2013, the Jay field escrow balance has increased by $7,004,011). Future estimated gross proceeds have also increased. As such, additional accompanying future capital expenditures and well abandonment costs are estimated by the Working Interest Owner, which Quantum has been escrowing against and delaying distribution payments to the Trust. For the basis of comparison, at the December 31, 2010 unaudited accounting date, the total future Aggregate Estimated Future Gross Proceeds amount was $142,672,902 and the future Estimated Future Production Costs amount was $101,226,583. The Conveyances permit the Working Interest Owner to release funds from the Special Cost escrow at any time if they determine in their sole discretion that there no longer exists a need for escrowing all or any portion of such funds. However, the Working Interest Owner is not required to do so.
The Trustee has formally engaged BRI Consulting Group, Inc. ("BRI") of Houston, TX to engage in a joint interest audit with Quantum on behalf of the Trust. It is anticipated that this work will begin in early November, 2013.
In addition to the previously reported unpaid advance from the Bank of New York Mellon of $2,582,294 to pay administrative expenses while Bank of New York Mellon served as Trustee, the Trust has borrowed $900,000 to fund ongoing administrative expenses of the Trust. The Trust Agreement prohibits the Trust from making any distributions to unitholders until all loans are repaid in full.
The Trustee informs Unitholders that any administrative and tax related questions regarding the Trust can be addressed by calling Issuer Direct shareholder services at 919-481-4000.
This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical facts, are "forward-looking statements" for purposes of these provisions. These forward-looking statements include all statements included in this press release regarding the amount of any future net revenues attributable to the Trust’s interests. Any investment in LL&E Royalty Trust Units is subject to all of the risks described in the Trust’s periodic and current reports filed with the Securities and Exchange Commission, including the risks described under the caption "Risk Factors" in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on August 19, 2011. The Trust’s annual, quarterly and other filed reports are available over the Internet at the SEC’s web site at http://www.sec.gov/.
LL&E ROYALTY TRUST
Attention: Erik Abraham
Source: LL&E ROYALTY TRUST