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LL&E Royalty Trust Announces Update

^{Published on 2010-10-19 05:40:58 - Market Wire}
 

AUSTIN, Texas--([ BUSINESS WIRE ])--LL&E Royalty Trust (Pink Sheets: LRTR) announced today that:

On October 18, 2010 The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee") of LL&E Royalty Trust (the "Trust"), received a reserve report as of July 31, 2010 (the "Reserve Report") prepared for the Trust by its independent petroleum engineers, Miller and Lents, Ltd. ("Miller and Lents"), relating solely to the Trust's interests in the Jay Field. The Reserve Report, which is based on information furnished to Miller and Lents by the working interest owner, indicates that, as of July 31, 2010, the estimated future net revenues attributable to the interests held by the Trust in the Jay Field are $14.7 million, and that the standardized measure of discounted estimated future net cash flows, discounted at 10% annually in accordance with SEC guidelines, is $10.5 million. The estimated future net revenues and the standardized measure of discounted estimated future net cash flows have not been adjusted to account for production since July 31, 2010 or for changes in market prices after that date.

In the Reserve Report, Miller and Lents estimated that, as of July 31, 2010, there were approximately 205 thousand barrels of oil equivalent of imputed proved reserves attributable to the Trust's interest in the Jay Field, 100% of which were oil and natural gas liquids, 81% of which were proved developed producing and 19% proved undeveloped. The average price assumptions used in preparing the Jay Field estimates were $75.22 per barrel of oil and $51.90 per barrel of natural gas liquids. No natural gas sales are assumed in the Reserve Report.

There are many uncertainties inherent in estimating quantities and values of proved reserves and in projecting future rates of production and the timing of development expenditures. The reserve data set forth in the Reserve Report, although prepared by independent engineers in a manner customary in the industry, are estimates only, and actual quantities and values of oil and gas are likely to differ from the estimated amounts set forth therein. In addition, the standardized measure of discounted estimated future net cash flows shown in the Reserve Report was prepared using guidelines established by the Securities and Exchange Commission for disclosure of reserves and should not be considered representative of the market value of such reserves. A market value determination would include many additional factors. The Trustee is not able to, and does not, make any estimate or projection of the value of the Trust's assets or any amount that a purchaser may be willing to pay for any of the assets. 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 SEC, 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, 2008, filed with the SEC on August 27, 2009.

A copy of the Reserve Report, dated October 18, 2010, is included with the Trust's public filings. Investors are cautioned to review the Reserve Report in its entirety. Although the Reserve Report does not address the Trust's interests in the South Pass 89 and Offshore Louisiana properties, the Trust has been advised that Miller and Lents does not expect that a reserve report addressing the Trust's interests in South Pass 89 and Offshore Louisiana would attribute any imputed reserves to the Trust's interests in either of those properties or any estimated future net revenues attributable to the interests held by the Trust in either of those properties.

As described in the Trust's public filings, the Trust is required to sell its assets and liquidate by December 31, 2010, or must thereafter sell its assets at public auction for cash. Quantum Resources Management LLC (aQuantuma), the operator of the Jay Field and the owner of the approximately 33.7% working interest (the aWorking Interesta) burdened by the Trusta™s Net Profits Interest (aNPIa), restored production in the Jay Field in December 2009. The Trusta™s NPI entitles it to receive 50% of the Net Proceeds, as defined in the conveyances, from the sale of oil and gas in the Jay Field. The corresponding net revenue interest associated with the Trusta™s NPI is approximately 25.3%.

Average oil sales in the Jay Field have increased from 553 barrels of oil per day (aBbls/da) for the month ended December 31, 2009 to 2,910 Bbls/d for the month ended July 31, 2010. Set forth below is information on the gross average daily oil sales volumes in the Jay Field from December 2009 to July 2010:

The Trustee has been informed that, as a result of changes in the Jay Field development strategy, average lifting costs have decreased from approximately $55/Bbl to approximately $32/Bbl through July 31, 2010.

The Trusta™s NPI generated cash proceeds from the Jay Field for the seven months ended July 31, 2010 of approximately $1.5 million, before adjustments for Excess Production Costs and certain net interest charges associated with Excess Production Costs and the Special Cost Escrow.

The cumulative Excess Production Costs and Special Cost Escrow balance associated with the Working Interest for the Jay Field as of July 31, 2010 totaled approximately $14.0 million and $4.5 million, respectively (the Trust's interest in such figures is 50%). The Reserve Report included additional capital expenditures of approximately $6.2 million (gross) from August to December 2010 that were not included in the cumulative Excess Production Costs as of July 31, 2010. These additional capital expenditures and the cumulative Excess Production Costs attributable to the Working Interest must be recovered from future revenues attributable to the Working Interest prior to payments being made to the owner of the NPI.

The Trust had unpaid administrative expenses of approximately $635,000 as of October 11, 2010. The Trust is required to pay all of its expenses prior to any distribution to unit holders.

As previously disclosed, the Trust is required by its Trust Agreement to terminate. As result of the termination of the Trust, the Trustee has retained an investment banking firm to manage the sale of the Trusta™s assets. As previously reported, the Trust previously suspended the marketing process in light of market conditions. However, the Trustee and the investment banking firm have now recommenced the marketing process.

In accordance with the documents governing the Trust, if any asset required to be sold has not been sold by December31, 2010, the Trustee will cause the asset to be sold at public auction to the highest cash bidder. The Trustee is required to mail notice of any such public auction to all Unit holders at least 30days prior to any such auction. Except in connection with any proposed non-cash sale, no approval of the Unit holders will be required in connection with the sale of the Trusta™s assets.

Subject to limitations set forth in the Trust Agreement, the Trustee is authorized to borrow funds if necessary to pay expenses of the Trust. If permitted, any such borrowings may be on a secured or unsecured basis. The Trustee is authorized by the Trust Agreement to borrow any such funds from itself or from any other person; however, no assurance can be given that the Trustee will be able to borrow money on terms the Trust considers reasonable or at all.

This press release contains statements that are aforward-looking statementsa within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical facts, are aforward-looking statementsa for purposes of these provisions. These forward-looking statements include all statements included in this press release regarding the operation of the Jay Field, the amount of any future net revenues attributable to the Trust's interests and all statements regarding the future status and termination of the Trust. An investment in Units issued by LL&E Royalty Trust is subject to the risks described in the Trusta™s Annual Report on Form 10-K for the year ended December31, 2008, and all of its other filings with the Securities and Exchange Commission. The Trusta™s annual, quarterly and other filed reports are available over the Internet at the SECa™s web site at [ http://www.sec.gov ].