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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
Commission File Number: 1-12474
(Check One): o Form 10-K oForm 20-F oForm 11-K þ Form 10-Q oForm N-SAR
For Period Ended: September 30, 2009
o Transition Report on Form 10-K
o Transition Report on Form 20-F
o Transition Report on Form 11-K
o Transition Report on Form 10-Q
o Transition Report on Form N-SAR
For the Transition Period Ended:
Nothing in this form shall be construed to imply that the Commission has verified any information
contained herein.
If the notification relates to a portion of the filing checked above, identify the Item(s) to which
the notification relates:
Part I REGISTRANT INFORMATION
Torch Energy Royalty Trust
Full Name of Registrant
N/A
Former Name if Applicable
1100 North Market Street
Address of Principal Executive Office (Street and Number)
Wilmington, Delaware 19890
City, State and Zip Code
PART II RULES 12b-25(b) AND (c)
If the subject report could not be filed without unreasonable effort or expense and the registrant
seeks relief pursuant to Rule 12b-25(b), the following should be completed. (Check box if
applicable)
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(a)
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The reasons described in reasonable detail in Part III of this
form could not be eliminated without unreasonable effort or expense; |
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(b)
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The subject annual report, semi-annual report, transition
report on Form 10-K, Form 20-F, 11-K or Form N-SAR, or portion thereof, will be
filed on or before the fifteenth
calendar day following the prescribed due date; or the subject quarterly report of
transition report on Form 10-Q, or portion thereof will be filed on or before the fifth
calendar day following the prescribed due date; and |
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(c)
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The accountants statement or other exhibit required by Rule
12b-25(c) has been attached if applicable. |
Part III NARRATIVE
State below in reasonable detail the reasons why Form 10-K, 11K, 20-F, 10-Q, N-SAR, or the
transition report portion thereof, could not be filed within the prescribed time period.
Background
The Torch Energy Royalty Trust (the Trust) is a Delaware statutory trust and was formed
effective October 1, 1993, pursuant to a trust agreement (the Trust Agreement) entered into by
and among Wilmington Trust Company, not in its individual capacity but solely as trustee of the
Trust (the Trustee), Torch Royalty Company (TRC), Velasco Gas Company, Ltd. (Velasco), as
owners of certain oil and gas properties, and Torch Energy Advisors Incorporated (Torch) as
grantor. TRC and Velasco created net profits interests (Net Profits Interests) and conveyed such
interests to Torch. Torch conveyed the Net Profits Interests to the Trust in exchange for an
aggregate of 8,600,000 units of beneficial interest in the Trust (Units). The sole purpose of
the Trust is to hold the Net Profits Interests, to receive payments from TRC and Velasco, and to
make payments to Unitholders. The Trust does not conduct any business activity and has no officers,
directors or employees.
As initially disclosed by the Trust in its Current Report on Form 8-K dated January 28, 2008,
after the close of business on Friday, January 25, 2008, the Trustee received a notice of a demand
(the Demand Notice) for the Texas arbitration before JAMS from TRC, Torch E&P Company and
Constellation Energy Partners LLC (collectively the Working Interest Owners). The working
interests are each burdened by the Net Profits Interests contained in three net overriding royalty
conveyances (the Conveyances). The Working Interest Owners sought a declaratory judgment that
under the Conveyances the mechanisms contained in the Oil and Gas Purchase Contract, dated as of
October 1, 1993, entered into by and among Torch Energy Marketing, Inc., TRC and Velasco (the
Purchase Contract) (including the sharing price and minimum price mechanisms) should continue to
be utilized for calculating the quarterly Net Profits Interests payments following termination of
the Trust.
On January 29, 2008 (the Termination Date), holders of more than 66 2/3% of the outstanding
Units affirmatively voted for a proposal to terminate the Trust in accordance with the terms and
provisions of the Trust Agreement. The Purchase Contract and the Administrative Services Agreement
terminated upon the termination of the Trust.
On February 21, 2008, the Trustee filed a response to the Demand Notice and filed a response
and counterclaim on April 25, 2008 to the claimants amended demand notice of April 16, 2008
(collectively, the Responses). As stated in the Responses, the Trustee, upon further legal
analysis of the Purchase Contract and the Conveyance documents, concluded that the sharing price
mechanism of the Purchase Contract (which determined the calculation of the Net Profits Interests
prior to the termination of the Purchase Contract) did not survive the termination of the Purchase
Contract or the termination of the Trust. On April 11, 2008, Trust Venture Company, LLC (Trust
Venture), which owns the majority of Units in the Trust, submitted an unopposed request to
intervene in the Texas arbitration and become a party to the arbitration. Trust Venture agreed
with the Trustee, and took the position in the Texas arbitration, that the sharing price mechanism
of the Purchase Contract did not survive the termination of the Purchase Contract or the
termination of the Trust.
The hearing on the merits in the arbitration commenced on June 16, 2008 in Texas and was
completed on June 20, 2008. On July 18, 2008, JAMS, through a panel of three arbitrators (the
Arbitrators), released a final award notice to all parties (the Award Notice). In the Award
Notice, the Arbitrators found that the
Conveyances are not ambiguous and the pricing mechanism of
the Purchase Contract is incorporated by reference into the Conveyances notwithstanding termination
of the Purchase Contract. The Arbitrators
therefore concluded that the pricing mechanism (including the sharing price and minimum price
mechanism) continues to burden the Net Profits Interests and will do so for the life of the
Conveyances.
As disclosed by the Trust in its Annual Report on Form 10-K for the period ended December 31,
2007 (2007 Annual Report), Trust Venture intended to commence a derivative action against
Constellation Energy Partners LLC (CEP), the working interest owners of certain oil and gas
fields located in Alabama, in accordance with, inter alia, Section 3816 of the Delaware Statutory
Trust Act, codified at 12 Del. C. 3816(a), to (i) recover any overcharges to the Trust by CEP
related to administrative costs, water gathering, treating and disposal costs and severance taxes
and (ii) require CEP to provide an accounting of its revenues and expenses as required under the
Net Overriding Royalty Conveyance filed of record in Tuscaloosa County, Alabama. On December 30,
2008, Trust Venture filed and subsequently served a derivative lawsuit against CEP in Alabama state
court alleging such overcharges, challenging the calculation of the Net Profits Interests under the
conveyances that were used to transfer the net profits interests in each state, and demanding an
accounting of CEPs revenues and expenses. In response to the derivative lawsuit, on February 9,
2009, CEP filed in Alabama state court a motion to dismiss such lawsuit without prejudice in favor
of arbitration in Texas on various grounds, including Trust Ventures alleged lack of standing and
Trust Ventures alleged failure to comply with certain contractual agreements. The Alabama state
court denied CEPs motion to dismiss on February 25, 2009, and so the Alabama derivative action is
proceeding against CEP.
On February 12, 2009, the Trustee received a certified copy of a demand for arbitration dated
February 9, 2009 by CEP before JAMS in Texas (the Demand Notice) seeking a declaratory judgment
that CEP (i) correctly calculated and paid the Net Profits Interests payments due to the Trust, (ii)
correctly charged the Trust for certain well accounting services and severance taxes, and (iii) has
complied with its contractual reporting requirements due to the Trust. In the Demand Notice, CEP
claimed that, because the Trust authorized Trust Venture to file the derivative lawsuit, there
exists a judicable conflict between CEP and the Trust that is subject to resolution by
arbitration.
On February 12, 2009, Trust Venture filed an emergency motion in Alabama state court to stay
the arbitration demanded by CEP until such time as the court issues a judgment as to the
enforceability of the arbitration agreement made by and between the Trust and CEP. The court
denied that motion on February 25, 2009. On March 9, 2009, the Trustee filed its own motion in the
same Alabama state court seeking to intervene in the derivative action for the limited purpose of
moving for a stay of the Texas arbitration until resolution of the derivative action. The Alabama
state court heard oral argument on the Trustees motion on March 25, 2009, and on April 1, 2009,
the Alabama state court denied the Trustees motion to stay the Texas arbitration and further
denied CEPs motion to stay the Alabama state court derivative action. Subsequently, the Trustee
filed a motion to dismiss or stay the Texas arbitration with JAMS and the arbitration panel heard
oral argument on April 10, 2009 and on April 13, 2009 granted the Trustees motion to stay the
Texas arbitration proceedings pending the outcome of the Alabama derivative action. The
arbitration panel subsequently entered an Order of Dismissal with respect to the Texas arbitration
dated July 27, 2009. There can be no assurance as to the outcome or result of the Alabama
derivative litigation or that CEP will not challenge the Order of Dismissal entered by the
arbitration panel on July 27, 2009 or file other arbitration claims.
There can be no assurance as to the outcome or result of a lawsuit or the effect of the
derivative lawsuit may have on the Trust or the Units, including the market value thereof.
The Trust has previously disclosed information concerning its inability to timely file its
2008 Annual Report on its Form 12b-25 filed with the Securities and Exchange Commission (SEC) on
April 1, 2009 and its inability to timely file its Quarterly Reports on Form 10-Q for the quarterly
period ended March 31, 2008, for the quarterly
period June 30, 2008, for the quarterly period
ended September 30, 2008, for the quarterly period ended March 31, 2009 and for the quarterly
period ended June 30, 2009 on its Form 12b-25, filed with
the SEC on May 16, 2008, August 14, 2008, November 17, 2008, May 18, 2009 and august 14, 2009,
respectively (the Annual Report and Quarterly Reports referenced in this sentence are collectively
referred to as the Reports). The Trust has also previously disclosed information regarding the
termination of the Trust, the Alabama derivative litigation, Texas arbitrations and other
information regarding the Trust on its Current Reports on Form 8-K filed with the SEC on February
18, 2009, October 22, 2008, July 22, 2008, June 3, 2008, April 21, 2008, April 7, 2008, February
22, 2008, February 11, 2008, January 31, 2008, January 28, 2008, January 25, 2008 and December 21,
2007 and on Schedule 14C filed with the SEC on January 7, 2008 (Definitive Information Statement
pursuant to Section 14(c) of the Securities Exchange Act of 1934). The Unitholders are urged to
read the above mentioned and all other filings by the Trust with the SEC carefully and in their
entirety.
Reasons for the Inability to Timely File the Trusts Current Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2009
The Trust is unable to timely file its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2009 (Current Quarterly Report) for the following reasons:
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The Trust intends to apply the sharing price and minimum price mechanisms for
calculating the quarterly Net Profits Interests payments and in its financial statements
after the Termination Date of the Trust for the entire winding up and liquidation period of
the Trust. The Trust is actively engaged in the process of preparing the Reports and the
Current Quarterly Report and will file these reports as soon as practical. |
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The Trustee is working diligently and intends to continue to work diligently with its
various service providers, including its auditors, to obtain all required financial
information, reserve reports, complete the financial statements for the Current Quarterly
Report and put into place the necessary financial processes required during the winding up
and liquidation period of the Trust. |
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The Trustee continues to review the materials associated with and respond as appropriate
to the current derivative litigation in Alabama. In preparing the Current Quarterly Report
information, the Trustee continues to review and analyze certain operating costs that the
Working Interest Owners and Torch have approved and included in calculating the quarterly
Net Profits Interests payments paid to the Trust. No assurances may be given about the
outcome of the derivative litigation or the review or any future review and audit of the
operating costs. |
As a result of the foregoing, the Trustees ability to obtain complete and reliable information
required to prepare and file the Current Quarterly Report on a timely basis has been adversely
affected.
Despite best efforts by the Trust, the reasons causing the inability to file timely could not be
eliminated by the registrant without unreasonable effort or expense.
PART IV OTHER INFORMATION
(1) |
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Name and telephone number of person to contact in regard to this notification |
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Kristin L. Moore |
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(302) 636-6016 |
(Name)
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(Area Code) (Telephone Number) |
(2) |
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Have all other periodic reports required under Section 13 or 15(d) of the
Securities Exchange Act of 1934 or Section 30 of the Investment Company Act of
1940 during the preceding 12 months or for such shorter period that the
registrant was required to file such report(s) been filed? If answer is no,
identified reports(s). |
o Yes þ No
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Annual Report on Form 10-K for the annual period ended December 31, 2008, Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, 2008, June 30, 2008,
September 30, 2008, March 31, 2009 and June 30, 2009 |
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Is it anticipated that any significant change in results of operations from
the corresponding period for the last fiscal year will be reflected by the
earnings statements to be included in the subject report or portion thereof? |
þ Yes o No
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If so: attach an explanation of the anticipated change, both narratively and quantitatively,
and, if appropriate, state the reasons why a reasonable estimate of the results cannot be
made. |
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Pursuant to Section 3.07 of the Trust Agreement, the Trustee established a
cash reserve account as of March 10, 2008 that the Trust could draw on after
that date for the payment of contingent or uncertain liabilities associated
with the winding up and liquidation period of the Trust, the now-completed
Texas arbitration and the current derivative litigation concerning the
Trust. Additional cash payments received from the Working Interest Owners
by the Trust since March 10, 2008 are subject to allocation in whole or part
to the cash reserve account which the Trustee adjusts from time to time as
necessary. On May 22, 2009, the Trust reported its cash distribution
payable on June 10, 2009 of 35.0 cents per unit. The Unitholders are urged
to read the Trusts SEC filings referenced in Part III Narrative above and
all other filings by the Trust with the SEC carefully and in their entirety. |
Torch Energy Royalty Trust
(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned hereunto duly
authorized.
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TORCH ENERGY ROYALTY TRUST |
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By: |
Wilmington Trust Company,
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not in its individual capacity but solely as |
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Trustee for the Trust |
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Date: November 16, 2009 |
By: |
/s/ Kristin L. Moore
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Kristin L. Moore, Assistant Vice President |
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(The Trust has no employees, directors or executive officers.)