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Sabine Royalty Trust Reports Operating Results (10-Q)

October 28, 2010 | About:
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10qk

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Sabine Royalty Trust (SBR) filed Quarterly Report for the period ended 2010-09-30.

Sabine Royalty Trust has a market cap of $781.8 million; its shares were traded at around $53.67 with a P/E ratio of 15.6 and P/S ratio of 18.8. The dividend yield of Sabine Royalty Trust stocks is 7.2%.SBR is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Trust makes monthly distributions to the holders of Units of the excess of the preceding months revenues received over expenses incurred. Upon receipt, royalty income is invested in short-term investments until its subsequent distribution. In accordance with the Trust Agreement, the Trusts only long-term assets consist of royalty interests in producing and proved undeveloped oil and gas properties. Although the Trust is permitted to borrow funds if necessary to continue its operations, borrowings are not anticipated in the foreseeable future. Results of Operations Distributable income consists of royalty income plus interest income plus any decrease in cash reserves established by the Trustee less general and administrative expenses of the Trust less any increase in cash reserves established by the Trustee. Distributable income for the three months ended September 30, 2010 was $13,681,026, or $0.94 per unit. Royalty income for the three months ended September 30, 2010 amounted to $14,113,712 while interest income was $1,366. General and administrative expenses totaled $434,052 for the three months ended September 30, 2010.

Distributions during the period were $.36179, $.33031, and $.28379 per Unit payable to Unit holders of record on July 15, August 16, and September 15, 2010, respectively.

Royalty income for the quarter ended September 30, 2010 increased approximately $3,874,000 or 38% compared with the third quarter of 2009. This increase was caused by increases in the production of both oil and natural gas as well as increases in the price of both oil and natural gas. Compared to the preceding quarter ended June 30, 2010, royalty income increased approximately $83,000 or 1%, due to an increase in the production of oil. This increase was tempered somewhat by decreases in the production of natural gas as well as decreases in the price of both oil and natural gas. Royalty income for the nine months ended September 30, 2010 increased $10,766,000 or 34% compared with the same time period in 2009. This increase was due mainly to an increase in natural gas production as well as increases in the price of both oil and natural gas. The increases were offset somewhat by a decrease in the production of oil.

Gas revenues received for the three months ended September 30, 2010, related primarily to production for April 2010 through June 2010. The average price of gas as reported by the Henry Hub for the same time period was $3.89 per Mcf. The average price of gas for the Henry Hub was $4.07 per Mcf for January 2010 through September 2010. Oil revenues for the three months ended September 30, 2010 related primarily to production for May 2010 through July 2010. The average price of oil as reported by Nymex for that time period was $75.44 per barrel. The average price of oil was $77.73 per barrel for January 2010 through September 2010. As of October 13, 2010, the average price of gas for the Henry Hub was $3.27 per Mcf and the average price of oil reported by Nymex was $81.67 per barrel. It is difficult to accurately estimate future prices of oil and gas, and any assumptions concerning future prices may prove to be incorrect.

Interest income for the quarter ended September 30, 2010 increased approximately $700 compared with the third quarter of 2009. Compared to the preceding quarter ended June 30, 2010, interest income increased approximately $300. Interest income for the nine months ended September 30, 2010 decreased approximately $18,600. Changes in interest income are the result of changes in interest rates and funds available for investment.

General and administrative expenses for the quarter ended September 30, 2010 decreased by approximately $21,400 compared to the same quarter of 2009 primarily due to decreases in the fees associated with the change in transfer agent, and escrow agent/trustee fees of approximately $28,400, and $10,800, respectively. These decreases were offset somewhat by increases in legal services and professional expenses of approximately $7,100 and $9,000, respectively. Compared to the previous quarter ended June 30, 2010, general and administrative expenses decreased approximately $176,900 due mainly to decreases in the timing of annual payments for engineering services, printing expenses related to annual reporting and tax reporting services of approximately $86,900, $65,900, and $36,000, respectively. These decreases were tempered by an increase in the escrowagent/trustee fees and timing of payments for audit services of approximately $2,000 and $10,000, respectively. General and administrative expenses for the nine months ended September 30, 2010 decreased approximately $153,000 due mainly to decreases in the escrowagent/trustee fees, transfer agent fees and legal services of approximately $39,400, $44,500 and $20,100, respectively, along with decreases in the timing of payments for auditing services and year-end tax reporting services of approximately $44,500 and $18,300, respectively. These decreases were offset somewhat by an increase in professional services of approximately $14,200.

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