LL&E ROYALTY TRUST TO MAKE NO DECEMBER DISTRIBUTION
LL&E ROYALTY TRUST TO MAKE NO DECEMBER DISTRIBUTION HOUSTON, Dec. 6 /PRNewswire/ -- LL&E Royalty Trust (NYSE: LRT) announced today that it would make no distribution in December 1991. Trust royalties related to September 1991 production were limited to $100,974, all of which were related to Fee Lands Royalties. Approximately $80,000 of such amount was a result of the receipt of payment for eight months of production from a field which began production in January 1991. The Productive Properties yielded no royalty payments as a result of the following factors: -- Production costs and expenses and capital expenditures have exceeded revenues at Jay Field for the past nine months, due primarily to ongoing repair and maintenance activities. Excess production costs were decreased by $800,000 in the past month. Remaining excess production costs amounting to approximately $2.9 million through the December distribution will be recouped by the working interest owner from future proceeds from Jay Field. (The trust's interest is equivalent to 50 percent of the net proceeds from Jay Field.) -- The working interest owner has informed the trustee that the results of its previously announced study regarding the estimated cost of dismantlement of platforms in the Offshore Louisiana property has confirmed that future proceeds from this property should be escrowed to provide for anticipated dismantlement costs, and commencing with the August distribution month, the working interest owner began escrowing funds for such costs. The working interest owner's estimate of total dismantlement costs at Offshore Louisiana is $2.5 million. The total amount of the escrow for the December distribution and the cumulative balance of the escrow are $35,000 and $764,000, respectively. (The trust's interest is equivalent to 90 percent of the net proceeds from Offshore Louisiana.) Future distributions, if any, from Offshore Louisiana will only be resumed after dismantlement costs have been fully escrowed. -- A platform is to be placed on South Pass Block 86 (in which the trust has no interest) which will produce oil and gas from a reservoir underlying both South Pass Block 86 and South Pass Block 89. The costs expended and charged to South Pass Block 89 in the December distribution month for design and fabrication of such platform and costs associated with the drilling of the 15-X well amounted to approximately $328,000. After these charges, South Pass Block 89 has excess production costs amounting to approximately $1 million which will be recouped by the working interest owner from future proceeds from South Pass Block 89. The remaining estimated total cost of the platform to be allocated to South Pass Block 89 is approximately $2.6 million. (The trust's interest is equivalent to 50 percent of the net proceeds from South Pass Block 89.) The approximately $1.3 million of remaining costs to be recouped from the trust's interest will adversely affect revenues to the trust from South Pass Block 89 for several months. However, the timing of the occurrence of the platform costs is not within the control of the working interest owner, and the
working interest owner is unable to predict the timing of such costs.
-- As previously announced, the working interest owner continues to escrow amounts from the Fort Worth Basin property in connection with the issue of recapture of intangible drilling and development costs under Section 1254 of the Internal Revenue Code. The total amount escrowed from the December distribution and the cumulative balance of the escrow are $7,000 and $672,000, respectively. (The trust's interest is equivalent to 90 percent of the net proceeds from Fort Worth Basin.) Pending the possible appeal by the IRS of the previously announced favorable ruling rendered by the United States Tax Court of the Section 1254 issue, the working interest owner has advised the trustee that it intends to continue escrowing all net proceeds from Fort Worth Basin. The working interest owner intends to closely monitor each of the aforementioned properties with respect to possible changes in its estimates of relevant factors. The date of resumption of future distributions from Jay Field and South Pass Block 89 will be dependent on normal factors associated with oil and gas operations such as oil and gas production levels and prices, the results and extent of the ongoing maintenance program at Jay Field and the timing of capital requirements for the platform and remaining wells to be drilled at South Pass Block 89. Based on the continuation of the latest prices being received at Jay Field and South Pass Block 89, the working interest owner estimates, subject to the aforementioned factors, that distributions may resume by early 1992. The working interest owner also intends to continue to monitor the Section 1254 recapture issue, for which it has determined it is eligible to escrow funds from all trust properties. It has advised the trustee that it does not intend to exercise its rights to escrow funds, other than for Fort Worth Basin, for this issue for the current period. The trust's administrative expenses have exceeded the production month royalties since the May 1991 production month, and as of October 31, 1991, approximately $100,000 of such excess expenses remain outstanding. These excess administrative expenses will be recovered from future distributions to the trust. As previously announced, the working interest owner is making a proposal to purchase the assets of the trust for approximately $52.2 million (subject to certain reductions) payable in shares of LL&E capital stock, and the trustee has agreed to call a special meeting of the unitholders to enable the unitholders to consider and vote upon that proposal. If the proposal is approved by holders of a majority of the outstanding units, unitholders would receive shares of LL&E capital stock in exchange for their units. After the delivery of such shares (and cash in lieu of fractional shares) to the unitholders, the trust would be terminated. The value of the shares of LL&E capital stock to be delivered to unitholders (measured by reference to the market price of such shares on the New York Stock Exchange) would be approximately $2.75 per unit prior to the deduction of various trust costs and expenses, amounts attributable to excess production costs outstanding at the closing, reserves for trust liabilities and the amount of any monthly distributions to the unitholders subsequent to Oct. 1, 1991. Although the trustee cannot accurately estimate the amount of such deductions at present, if the transaction had been effected on Oct. 31, 1991, the value of the shares of capital stock to be distributed would have been reduced to approximately $2.63 per unit. The trustee anticipates that the transaction would be a taxable event to the unitholders. The trustee anticipates that the special meeting is likely to be held in early 1992; however, neither the date of the meeting nor the record date for voting at the meeting has been set. The meeting would be held in Houston, although the exact location of the meeting has not yet been determined. The trustee anticipates that, if the proposal is approved by the unitholders, the sale of the trust's assets would occur promptly after such approval. -0- 12/6/91 /CONTACT: Roark Ashie of First City, Texas-Houston, N.A., as trustee, 713-658-7369/ (LRT) CO: LL&E Royalty Trust ST: Texas IN: OIL SU: DIV FC -- NY069 -- 0281 12/06/91 17:39 EST
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|Date:||Dec 6, 1991|
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