ITEM
8.01. Other Events.
On December 4,
2007, The Bank of New York Trust Company, N.A., as trustee (the Trustee) of
Santa Fe Energy Trust (the Trust), received a revised reserve report (the Revised
Reserve Report) prepared for the Trust by its independent petroleum engineers,
Ryder Scott Company, L.P. (Ryder Scott).
The Revised Reserve Report, which is based on information furnished to Ryder
Scott by Devon Energy Corporation (Devon), indicates that, as of December 31,
2006, the estimated future net revenues attributable to the interests held by
the Trust are $64.1 million (an increase of $1.2 million from the $62.9 million
estimate contained in theRyder Scott report dated July 16, 2007), and that
the standardized measure of discounted estimated future net cash flows,
discounted at 10% annually in accordance with SEC guidelines, is $44.8 million
(an increase of $5.7 million from the $39.1 million estimate contained in
theRyder Scott report dated July 16, 2007). 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 December 31, 2006 or for changes in market prices
after that date. A copy of the Revised Reserve
Report, dated November 30, 2007, is included herewith. Investors are cautioned to review the Revised
Reserve Report in its entirety.
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 Revised 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 Revised Reserve Report were 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 or the
Depositary Units or the Trust Units evidenced thereby. A market value
determination would include many additional factors. Further, any investment in Trust Units is
subject to all of the risks described in the Trusts periodic and current
reports filed with the SEC, including the risks described under the caption Risk
Factors in the Trusts Annual Report on Form 10-K for the year ended December 31,
2005, filed with the SEC on March 16, 2006.
As previously
disclosed, on November 8, 2007, the Trustee entered into a Purchase and
Sale Agreement (the Purchase Agreement) with Amen Properties, Inc. (Amen),
pursuant to which Amen has agreed to purchase all of the net profits royalties
held by the Trust for approximately $50.4 million, subject to certain
adjustments, and subject to customary closing conditions. The assets to
be sold consist of the Trusts interests in certain royalty interests and
working interests in oil and gas properties located in a number of different
states.
The closing date
of the sale under the Purchase Agreement is expected to be on or about December 18,
2007, with an effective date of October 1, 2007. Subject to various
limitations, the Purchase Agreement provides for potential adjustments to the
purchase price resulting from, among other things, adjustments for
overproduction or underproduction of natural gas from the properties to which
the interests relate, and changes in excess of specified amounts to the price
of West Texas Intermediate Crude Oil for December 2008 as of the business
day prior to the closing date.
The Purchase
Agreement provided for an increase to the purchase price in the event that the
Revised Reserve Report reflected an increase in the aggregate net present value
of the interests being sold as of December 31, 2006, when compared to the
prior reserve report, and after making certain adjustments to the Revised
Reserve Report in accordance with the Purchase Agreement. However, after making the adjustments in
accordance with the Purchase Agreement, the Revised Reserve Report will not
result in an adjustment to the purchase price.
The closing of the
transactions contemplated by the Purchase Agreement is conditioned on, among
other things, the Trustees receipt of an opinion from a nationally recognized
investment banking firm regarding the fairness, from a financial point of view,
of the transactions contemplated by the Purchase Agreement. The Purchase
Agreement includes other conditions, representations, warranties, covenants and
other customary provisions, including provisions limiting the types and amounts
of any claims the parties might otherwise assert against each other and
providing limitations on the time after the closing during which any such
claims may be made.
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The description
herein of the material terms of the Purchase Agreement is qualified in its
entirety by reference to the Purchase Agreement, which is attached as Exhibit 10.1
to the Trusts Report on Form 8-K filed on November 8, 2007.
The Trustee is
required by the documents governing the Trust to sell the properties. The
parties intend to consummate the transaction on or about December 18,
2007. If the sale closes as anticipated, the Trustee intends to
distribute the net proceeds of the sale (after deducting amounts
necessary to pay any fees, expenses, liabilities and other obligations of the
Trust, and after setting aside any amounts the Trustee determines to hold in
reserve) to unitholders in accordance with the Trust Agreement.
The information
furnished pursuant to this Item 8.01 and in Exhibit 99.1 shall not be
deemed filed for purposes of Section 18 of the Securities Exchange Act
of 1934, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933.
ITEM
9.01. Financial Statements and Exhibits.
(d)
Exhibits.
99.1
Reserve Report prepared by Ryder Scott
Company, L.P. dated November 30, 2007.
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