UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-11748
EASTERN AMERICAN NATURAL GAS TRUST
(Exact name of registrant as specified in its charter)
Delaware 36-7034603
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
The Bank of New York
Care of BNY Midwest Trust Company
2 North Lasalle Street
Chicago, Illinois 60602
(Address of principal executive offices)
(Zip Code)
(312) 827-8553
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes |X| No |_|
As of May 13, 2003, 5,900,000 Units of Beneficial Interest in Eastern American
Natural Gas Trust were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
EASTERN AMERICAN NATURAL GAS TRUST
STATEMENTS OF DISTRIBUTABLE INCOME
(Unaudited)
Three Months Ended
March 31
2003 2002
----------- -----------
Royalty Income $2,998,805 $1,771,268
Operating Expenses:
Taxes on production and property 204,813 121,135
Operating cost charges 127,611 125,637
----------- -----------
Total Operating Expenses 332,424 246,772
----------- -----------
Net Proceeds to the Trust 2,666,381 1,524,496
General and Administrative Expenses (303,758) (165,450)
Interest Income 244 701
Cash Proceeds on Sale of Net Profits Interests 0 303,438
----------- -----------
Distributable Income 2,362,867 1,663,185
Cash Reserve (100,000) 0
----------- -----------
Quarterly Distribution Amount $2,262,867 $1,663,185
=========== ===========
Distributable Income Per Unit (5,900,000
units authorized and outstanding) $0.4005 $0.2819
=========== ===========
Quarterly Distribution Per Unit (5,900,000
units authorized and outstanding) $0.3835 $0.2819
=========== ===========
The accompanying notes are an integral part of these financial statements.
EASTERN AMERICAN NATURAL GAS TRUST
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
Assets:
Cash $ 244 $ 406
Net Proceeds Receivable 2,666,381 2,310,449
Net Profits Interests in Gas Properties 93,162,180 93,162,180
Accumulated Amortization (55,452,615) (54,466,381)
----------- -----------
Total Assets $40,376,190 $41,006,654
=========== ===========
Liabilities and Trust Corpus:
Trust General and Administrative
Expenses Payable $ 303,758 $ 145,098
Distributions Payable 2,262,867 2,165,757
Trust Corpus (5,900,000 Trust Units
authorized and outstanding) 37,809,565 38,695,799
----------- -----------
Total Liabilities and Trust Corpus $40,376,190 $41,006,654
=========== ===========
The accompanying notes are an integral part of these financial statements.
EASTERN AMERICAN NATURAL GAS TRUST
STATEMENTS OF CHANGES IN TRUST CORPUS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Trust Corpus, Beginning of Period $38,695,799 $43,169,981
Distributable Income 2,362,867 1,663,185
Distributions Payable to Unitholders (2,262,867) (1,663,185)
Amortization of Net Profits Interests
in Gas Properties (986,234) (1,103,407)
------------ ------------
Trust Corpus, End of Period $37,809,565 $42,066,574
============ ============
The accompanying notes are an integral part of these financial statements.
EASTERN AMERICAN NATURAL GAS TRUST
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1. Organization of the Trust
The Eastern American Natural Gas Trust (the "Trust") was formed under the
Delaware Business Trust Act pursuant to a Trust Agreement (the "Trust
Agreement") among Eastern American Energy Corporation ("Eastern American"), as
grantor, Bank of Montreal Trust Company, as Trustee ("Trustee"), and
Wilmington Trust Company, as Delaware Trustee (the "Delaware Trustee").
Effective May 8, 2000, The Bank of New York acquired the corporate trust
business of the then current Trustee and consequently is currently serving as
Trustee.
The Trust was formed to acquire and hold net profits interests (the "Net
Profits Interests") created from the working interests owned by Eastern
American in 650 producing gas wells and 65 proved development well locations
(the "Development Wells") in West Virginia and Pennsylvania (the "Underlying
Properties").
On March 15, 1993, 5,900,000 Depositary Units were issued in a public
offering at an initial public offering price of $20.50 per Depositary Unit.
Each Depositary Unit consists of beneficial ownership of one unit of
beneficial interest ("Trust Unit") in the Trust and a $20 face amount
beneficial ownership interest in a $1,000 face amount zero coupon United
States Treasury Obligation ("Treasury Obligation") maturing on May 15, 2013.
The financial statements of the Trust to which these notes relate do not
incorporate information concerning the Treasury Obligations, the beneficial
interest in which is held for the Unitholders by the Depositary.
The Net Profits Interests are passive in nature, and neither the Trustee
nor the Delaware Trustee has management control or authority over, nor any
responsibility relating to, the operation of the properties subject to the Net
Profits Interests. The Trust Agreement provides, among other things, that the
Trust shall not engage in any business or commercial activity or acquire any
asset other than the Net Profits Interests initially conveyed to the Trust;
the Trustee may establish a reserve for payment of any liability which is
contingent, uncertain in amount or that is not currently due and payable; the
Trustee is authorized to borrow funds required to pay liabilities of the
Trust, provided that such borrowings are repaid in full prior to further
distributions to Unitholders; and the Trustee will make quarterly cash
distributions to Unitholders from funds of the Trust.
After the Trust was formed, 59 of the 65 Development Wells were drilled
and completed. The remaining six Development Wells were not drilled. Clear
title to two of the Development Wells could not be established, and they were
excluded from the Trust in accordance with the conveyance transferring them to
the Trust. Eastern American asserted the remaining four undrilled Development
Wells, if drilled, would be too close to then existing wells on the property
or an adjoining property, and thereafter settled its dispute with the Trust
about drilling those four Development Wells by agreeing instead to pay the
Trust annually for the annual volume of gas projected to be produced from
those Development Wells as if they had been drilled.
The Net Profits Interests initially consisted of a royalty interest
("Royalty NPI") in 322 wells and a term interest ("Term NPI") in the remaining
wells and locations. As of March 31, 2003, the Trust held Net Profits
Interests in 678 wells, consisting of Royalty NPI in 317 wells and Term NPI in
the remaining wells. The Term NPI expire by their terms on May 15, 2013, or
such time as 41,683 MMcf of gas has been produced that is attributable to
Eastern American's net revenue interest in the properties burdened by the Term
NPI. As of December 31, 2002, based on the Independent Petroleum Engineer's
Report, 18,319 MMcf of the maximum 41,683 MMcf has been produced.
Between May 15, 2012, and May 15, 2013 (the "Liquidation Date"), the
Trustee is required to sell all the Royalty NPI and liquidate the Trust. Under
the Trust Agreement, Eastern American has the right of first refusal to
purchase any of the Royalty NPI the Trustee is required to sell after the
Liquidation Date. If it exercises this right, Eastern American must pay the
appraised Fair Value (as defined in the Trust Agreement) of the Royalty NPI,
or the relevant third party offer price if a third party has offered to
purchase the NPI. Unitholders of record on the relevant record dates will
receive the net proceeds from selling the Royalty NPI in accordance with the
Trust Agreement, and also will receive their respective share of the matured
face amount of the Treasury Obligations held by the Depositary.
NOTE 2. Basis of Presentation
The information furnished is based upon certain estimates of production
for the periods presented and is therefore subject to adjustment in future
periods to reflect actual production for the periods presented. The
information furnished reflects all adjustments which are, in the opinion of
the Trustee, necessary for a fair presentation of the results for the interim
periods presented. The accompanying financial statements are unaudited interim
financial statements, and should be read in conjunction with the audited
financial statements and notes thereto included in the Trust's Annual Report
on Form 10-K for the year ended December 31, 2002.
NOTE 3. Trust Accounting Policies
The Trust serves as a pass-through entity, with items of depletion,
interest income and expense, and income tax attributes being based upon the
status and elections of Unitholders. Thus, the Statements of Distributable
Income show Distributable Income, defined as Trust income available for
distribution to Unitholders before application of those Unitholders'
additional expenses, if any, for depletion, interest expense, and income
taxes. The Trust uses the accrual basis to recognize revenue, with Royalty
Income recognized as reserves are extracted from properties and sold. Expenses
are also presented on an accrual basis. Actual cash receipts will vary from
the accrual of revenues due to, among other reasons, the payment provisions of
the gas purchase contract between the Trust and Eastern Marketing Corporation
(a subsidiary of Eastern American), which requires payment with respect to gas
production for a calendar quarter to be made to the Trust on or before the
tenth day of the third month following such quarter.
Net Profits Interests in Gas Properties are periodically assessed to
determine whether their net capitalized cost is impaired. The Trust will
determine if a writedown is necessary to its investment in the Net Profits
Interests in gas properties to the extent that total capitalized costs, less
accumulated amortization, exceed undiscounted future net revenues attributable
to proved gas reserves of the Underlying Properties. The Trust will then
provide a writedown to the extent that the net capitalized costs exceed the
discounted future net revenues attributable to proved gas reserves of the
Underlying Properties. Any such writedown would not reduce distributable
income, although it would reduce Trust Corpus.
Amortization of the Net Profits Interests in Gas Properties is calculated
on a units-of-production basis, whereby the Trust's cost basis in the
properties is divided by total Trust proved reserves to derive an amortization
rate per reserve unit. Such amortization does not reduce distributable income,
rather it is charged directly to Trust Corpus.
NOTE 4. Income Taxes
The Trust is a grantor trust and is not required to pay federal or state
income taxes. Accordingly, no provision for federal or state income taxes has
been made. All income is taxed to the Unitholders of the Trust.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement
The Trustee and Eastern American, its officers or its agents on behalf of
the Trust may, from time to time, make forward-looking statements (other than
statements of historical fact). When used herein, the words "anticipates,"
"expects," "believes," "intends" or "projects" and similar expressions are
intended to identify forward-looking statements. To the extent that any
forward-looking statements are made, the Trust is unable to predict future
changes in gas prices, gas production levels, economic activity, legislation
and regulation, and certain changes in expenses of the Trust. In addition, the
Trust's future results of operations and other forward looking statements
contained in this item and elsewhere in this report involve a number of risks
and uncertainties. As a result of variations in such factors, actual results
may differ materially from any forward-looking statements. Some of these
factors are described below. The Trustee and Eastern American, disclaims any
obligations to update forward looking statements and all such forward-looking
statements in this document are expressly qualified in their entirety by the
cautionary statements in this paragraph and by the statements in the Annual
Report on Form 10-K.
General
The Trust does not conduct any operations or activities. The Trust's
purpose is, in general, to hold the Net Profits Interests, to distribute the
cash proceeds to Unitholders which the Trust receives in respect of the Net
Profits Interests (net of Trust expenses), and to perform certain
administrative functions in respect of the Net Profits Interests and the
Depositary Units. Accordingly, the Trust derives substantially all of its
income and cash flows from the Net Profits Interests. The Trust has no source
of liquidity or capital resources other than the cash flows from the Net
Profits Interests.
The Net Profits Interests were created pursuant to conveyances (the
"Conveyances") from Eastern American to the Trust. In connection therewith,
Eastern American assigned its rights under a gas purchase contract (the "Gas
Purchase Contract") which obligates Eastern Marketing Corporation, a
subsidiary of Eastern American, to purchase all of the natural gas produced
from the Underlying Properties which is attributable to the Net Profits
Interests.
The Conveyances and the Gas Purchase Contract entitle the Trust to
receive an amount of cash for each calendar quarter equal to the Net Proceeds
for such quarter. "Net Proceeds" for any calendar quarter generally means an
amount of cash equal to (a) 90% of a volume of gas equal to (i) the volume of
gas produced during such quarter attributable to the Underlying Properties
less (ii) a volume of gas equal to "Chargeable Costs" for such quarter,
multiplied by (b) the applicable price for such quarter under the Gas Purchase
Contract. "Chargeable Costs" is that volume of gas which equates in value,
determined by reference to the relevant sales price under the Gas Purchase
Contract or the Conveyances, as applicable, to the sum of the "Operating Cost
Charge", "Capital Costs" and "Taxes". The "Operating Cost Charge" for 2003 is
based on an annual rate of $510,444, and for 2002 was an annual rate of
$503,354. The increase in the 2003 "Operating Cost Charge" reflects a
prospective adjustment made based upon changes in the Crude Petroleum and Gas
Production Workers Index for 2002. The Operating Cost Charge for 2003 has been
adjusted to reflect this change. As provided in the Conveyances, the Operating
Cost Charge will fluctuate based on the lesser of (A) five percent (5%) or (B)
a percentage, not less than zero percent (0%), equal to the percentage
increase, if any, in the average weekly earnings of Crude Petroleum and Gas
Production Workers for the last calendar year, as shown by the index of
average weekly earnings of Crude Petroleum and Gas Production Workers, as
published by the United States Department of Labor, Bureau of Labor
Statistics, based on December-to-December comparison. The Crude Petroleum and
Gas Production Workers Index for 2003 decreased by 3.1%. The Operating Cost
Charge was not increased as Development Wells were completed but will be
reduced for each well that is sold (free of the Net Profits Interests) or
plugged and abandoned. "Capital Costs" means Eastern American's working
interest share of capital costs for operations on the Underlying Properties,
but only for items having a useful life of at least three years, and not
including any capital costs incurred in drilling the Development Wells.
"Taxes" means ad valorem taxes, production and severance taxes, and other
taxes imposed on the Trust's interest in the Underlying Properties, or
production therefrom.
Pursuant to the Gas Purchase Contract, Eastern Marketing is obligated to
purchase such gas production at a purchase price per Mcf equal to the Index
Price. The Index Price for any quarter is determined solely by reference to
the Variable Price component. The Variable Price for any quarter is equal to
the Henry Hub Average Spot Price (as defined) per MMBtu plus $0.30 per MMBtu,
multiplied by 110% to effect a fixed adjustment for Btu content. The Henry Hub
Average Spot Price is defined as the price per MMBtu determined for any
calendar quarter equal to the price obtained with respect to each of the three
months in such quarter, in the manner specified below, and then taking the
average of the prices determined for each of such three months. The price
determined for any month of such quarter is equal to the average of (i) the
final settlement price per MMBtu for Henry Hub Gas Futures Contracts (as
defined), as reported in The Wall Street Journal, for such contracts which
expired in each of the five months prior to such month, (ii) the final
settlement price per MMBtu for Henry Hub Gas Futures Contracts, as reported in
The Wall Street Journal, for such contracts which expire during such month and
(iii) the closing settlement price per MMBtu of Henry Hub Gas Futures
Contracts determined as of the contract settlement date for such month, as
reported in The Wall Street Journal, for such contracts which expire in each
of the six months following such month. A Henry Hub Gas Futures Contract is
defined as a gas futures contract for gas to be delivered to the Henry Hub
which is traded on the New York Mercantile Exchange.
Accordingly, the Index Price payable to the Trust for production may be
higher or lower based on the fluctuations in natural gas futures prices during
the relevant calculation period. The price payable to the Trust will have a
direct impact, positively or negatively, on the quarterly distributions
payable by the Trust to its unit holders.
Eastern American had a disagreement with the Trust over Eastern
American's obligation to drill certain Development Wells that were closely
offset by third parties. The Trust agreed that in lieu of drilling these
closely offset Development Wells that Eastern American could provide the
Trust, on an annual basis commencing on April 1, 1997, and over the remaining
life of the Trust, a volume of gas which is equal to the projected volumes of
the wells as if they had been drilled. These volumes have been estimated by
Ryder Scott Company, independent petroleum engineers. During the quarter ended
March 31, 2003, an additional volume of 5,260 Mcf was delivered to the Trust,
as compared to 5,833 Mcf for the quarter ended March 31, 2002. These
additional volumes fulfill Eastern American's obligation to provide volumes
for Development Wells that had been closely offset by third parties.
Eastern American has fulfilled its obligation with respect to the
drilling of the Development Wells. Since the inception of the Trust, Eastern
has drilled a total of 59 Development Wells, which are online and producing.
(See the Trust's Form 10-K for the fiscal year ended December 31, 2002 for a
more complete description of the Development Wells.)
During 2002, Eastern American was asked to sell 3 wells in which the
Trust owned a Net Profits Interest (the Western Pocahontas #7, #8 and #10
wells). The party seeking to purchase the wells owned the right to mine for
coal on such properties (the "Coal Lessee"). The Coal Lessee stated that the
wells would materially interfere with the Coal Lessee's proposed mining
operations.
Eastern American reviewed the Trust Agreement and production from these
wells, and determined that the Net Profits Interest associated with the
Western Pocahontas #7 well accounted for more than 0.25% of the total
production from the Underlying Properties for the prior twelve (12) month
period. Eastern American advised the Coal Lessee that it could not sell this
well.
Subsequently, the Coal Lessee asserted that the coal estate in the
relevant Underlying Properties was the dominate estate and that under the
relevant oil and gas leases and applicable case law, the Coal Lessee could
cause the Trust and Eastern American to plug and abandon the well. Eastern
American and the Trust did not necessarily agree with the Coal Lessee
position, however, and in an effort to avoid litigation, the Trust and Eastern
American entered into a Settlement Agreement and Release of All Claims with
the Coal Lessee pursuant to which Eastern agreed to sell the Western
Pocahontas #7 well for the amount of $426,187. The Trust's share of the
proceeds of $303,438 was included in Distributable Income to the Trust during
the quarter ended March 31, 2002. The Coal Lessee purchased the two additional
wells, the Western Pocahontas #8 and #10 for the amount of $209,561. The
Trust's share of the proceeds of $188,605 was also included in the
Distributable Income of the Trust during the quarter ended June 30, 2002.
During the quarter ended March 31, 2003, a Coal Lessee contacted Eastern
American and inquired as to whether it would sell the U.S. Steel Well # 26,
which is a well in which the Trust owns a Net Profits Interests. The Coal
Lessee stated that the well would materially interfere with the Coal Lessee's
proposed mining operations. Eastern American reviewed the Trust Agreement and
production from this well to determine if it could cause the Trust to sell its
Net Profits Interest in the well. Upon Review, it was discovered that the Net
Profits Interests associated with the U.S. Steel #26 well accounted for less
than .25% of the total production from the Underlying Properties for the prior
twelve (12) month period. Eastern American advised the Coal Lessee that it
could sell this well. Eastern American received $11,437 for the sales of the
U.S Steel Well #26. The effective date of the sale was March 1, 2003. However,
the transaction did not close until April 17, 2003. Therefore, the Trust's
share of the proceeds of $10,293 will be included in the Distributable Income
of the Trust during the quarter ending June 30, 2003.
Over the remaining life of the Trust, additional wells may need to be
disposed of for similar reasons.
Comparison of Results of Operations for Three Months Ended March 31, 2003 and
Three Months Ended March 31, 2002
-----------------------------------------------------------------------------
The Trust's distributable income was $2,362,867 for the three months
ended March 31, 2003 as compared to $1,663,185 for the three months ended
March 31, 2002. This increase was due to an increase in Royalty Income for the
three months ended March 31, 2003 ($2,998,805) as compared to the three months
ended March 31, 2002 ($1,771,268). The increase in Royalty Income was due to
an increase in the price payable to the Trust under the Gas Purchase Contract
as discussed below ($5.695 per Mcf for the three months ended March 31, 2003;
$3.041 per Mcf for the three months ended March 31, 2002). This increase was
offset by a decrease in production of gas attributable to the Net Profits
Interests for the three months ended March 31, 2003 (526 Mmcf) as compared to
the three months ended March 31, 2002 (581 Mmcf). The decline in production is
primarily attributable to natural production declines and the sale of wells.
Taxes on production and property were $204,813 for the three months ended
March 31, 2003 as compared to $121,135 for the three months ended March 31,
2002. The increase in taxes is due directly to the increase in Royalty Income
as discussed above. Trust general and administrative expenses were $303,758
for the three months ended March 31, 2003 as compared to $165,450 for the
three months ended March 31, 2002. This increase was due to an increase in
legal fees and the timing of payments for tax services performed as well as an
increase in the price for these services. During the three months ended March
31, 2003, the Trustee established a reserve in the amount of $100,000 to
facilitate the payment of vendor invoices on a timely basis. No such reserve
existed in the prior year. The distributable income includes no Cash Proceeds
on Sale of Net Profits Interests for the period ended March 31, 2003, while
$303,438 was recognized in the corresponding prior quarter. Amortization of
Nets Profits Interests in Gas Properties was $986,234 for the quarter ended
March 31, 2003 as compared to $1,103,407 for the quarter ended March 31, 2002.
This decrease was due to the decrease in production volumes.
The price payable to the Trust for gas production attributable to the Net
Profits Interests was $5.695 per Mcf for the three months ended March 31, 2003
and $3.041 per Mcf for the three months ended March 31, 2002. The price per
Mcf was higher for the three months ended March 31, 2003 than for the
corresponding three month period ended March 31, 2002 due to a increase in the
average spot market price for gas delivered at the Henry Hub near Henry,
Louisiana ($4.877 per Dth for the three months ended March 31, 2003; $2.465
per Dth for the three months ended March 31, 2002).
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The Trust does not engage in any operations, and does not utilize market
risk sensitive instruments, either for trading purposes or for other than
trading purposes. As described elsewhere herein, the Depositary Units consist
of beneficial ownership of one unit of beneficial interest in the Trust and a
$20 face amount beneficial ownership interest in a $1,000 face amount zero
coupon Treasury Obligation maturing on May 15, 2013. High and low price
information for the Treasury Obligations is included under Item 5. As
described elsewhere herein, gas production attributable to the Net Profits
Interest is sold to a wholly owned subsidiary of Eastern American pursuant to
the Gas Purchase Contract described herein.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. The Trustee maintains
disclosure controls and procedures designed to ensure that information
required to be disclosed by the Trust in the reports that it files or submits
under the Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and
regulations. Disclosure controls and procedures include controls and
procedures designed to ensure that information required to be disclosed by the
Trust is accumulated and communicated by the working interest owner, Eastern
American Energy Corporation ("Eastern American"), to The Bank of New York, as
Trustee of the Trust, and its employees who participate in the preparation of
the Trust's periodic reports as appropriate to allow timely decisions
regarding required disclosure.
Within 90 days of the date of this report, the Trustee carried out an
evaluation of the Trustee's disclosure controls and procedures. Robert
Griffin, as Agent of the Trustee, has concluded that the controls and
procedures are effective, while noting certain limitations on disclosure
controls and procedures as set forth below.
Due to the contractual arrangements of (i) the Trust Agreement, and (ii)
the rights of the Trustee under the Conveyances regarding information
furnished by Eastern American, there are certain potential weaknesses that may
limit the effectiveness of disclosure controls and procedures established by
the Trustee or its employees and their ability to verify the accuracy of
certain financial information. The contractual limitations creating potential
weaknesses in disclosure controls and procedures may be deemed to include:
Eastern American and its consolidated subsidiaries manage (i) historical
operating data, including production volumes, marketing of products,
operating and capital expenditures, environmental and other liabilities,
the effects of regulatory changes and the number of producing wells and
acreage, (ii) plans for future operating and capital expenditures and
(iii) geological data relating to reserves. While the Trustee requests
material information for use in periodic reports as part of its
disclosure controls and procedures, the Trustee does not manage this
information, and relies entirely on Eastern American to provide accurate
and timely information when requested for use in the Trust's reports.
Under the terms of the Trust Agreement, the Trustee is entitled to, and
in fact does rely, upon certain experts in good faith, including (i) the
independent reserve engineer with respect to the annual reserve report,
which includes projected production, operating expenses and capital
expenses, and (ii) the independent auditors the Trustee has contracted
with respect to the annual audit and quarterly reviews of financial data
provided by Eastern America. Other than contracting independent auditors
and reviewing the financial and other information provided to the Trust
by Eastern American on a quarterly basis, the Trustee makes no
independent or direct verification of this financial or other
information. While the Trustee has no reason to believe its reliance upon
experts is unreasonable, this reliance on experts and restricted access
to information may be viewed as a weakness.
The Trustee does not intend to expand its responsibilities beyond those
permitted or required by the Trust Agreement and those required under
applicable law.
Changes in Internal Controls. To the knowledge of the Trustee, there have been
no significant changes in the Trust's internal controls or in other factors
that could significantly affect the Trust's internal controls subsequent to
the date the Trustee completed its evaluation. The Trustee notes for purposes
of clarification that it has no authority over, and makes no statement
concerning, the internal controls of Eastern American.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
For the calendar quarter ended March 31, 2003, the high and low closing
prices of the Treasury Obligations (which have $1,000 face principal amount),
as quoted in the over-the-counter market for United States Treasury
obligations, were $671.20 and $618.30 respectively. On March 31, 2003 the
closing price of the Treasury Obligations, as quoted on such market, was
$655.60.
The Trust provides Unitholders with the option to separate the related
Treasury Obligation from the Trust Units. Upon exercising this option, the
Trustee transfers such Trust Units from the name of the Depositary to the name
of the withdrawing Unitholder. As of March 31, 2003, this option was exercised
on 107,900 Trust Units. (See the Trust's 10-K for the fiscal year ended
December 31, 2002 for a more complete description of the Withdrawal of Trust
Units and Restriction on Transfer.)
The Bank of New York has given notice of its intention to resign as
Trustee and Depositary for the Eastern American Natural Gas Trust in
accordance with (1) the Second Amended and Restated Trust Agreement of Eastern
American Natural Gas Trust pursuant to which the Eastern American Natural Gas
Trust was formed (the "Trust Agreement") and (2) the Depositary Agreement (the
"Depositary Agreement") under which Trust Units and Treasury Obligations (as
defined in the Trust Agreement) are held for Trust Unitholders. In accordance
with the Trust Agreement and the Depositary Agreement, such resignations will
not take effect until Trust Unitholders have approved a successor Trustee and
Depositary. Recommendations for a successor Trustee and Depositary will be
made to the Trust Unitholders and voted upon at a meeting of the Trust
Unitholders that will be scheduled in accordance with the Trust Agreement and
the Depositary Agreement.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1* Second Amended and Restated Trust Agreement of Eastern American
Natural Gas Trust
4.1* Specimen Depositary Receipt
4.2* Form of NPI Royalty Deposit Agreement
10.1* Form of Conveyance
10.2* Form of Term NPI Conveyance
10.3* Form of Gas Purchase Contact between Eastern American Energy
Corporation, Eastern Marketing Corporation and Eastern American
Natural Gas Trust
10.5* Form of Conveyance of Production Payment/Assignment of Production
from Eastern American Natural Gas Trust to Eastern Marketing
Corporation
10.6* Form of Assignment and Standby Performance Agreement
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter
ended March 31, 2003.
---------
* Incorporated by reference to the indicated exhibits to filings previously
made by the registrant with the Securities and Exchange Commission. All
references are to the registrant's Registration Statement on Form S-1,
Registration No. 33-56336, except for Exhibit 3.1, which is incorporated by
reference to the Registrant's Annual report on Form 10-K for the year ended
December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EASTERN AMERICAN NATURAL GAS TRUST
By: The Bank of New York, Trustee
/s/ Robert L. Griffin
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Name: Robert L. Griffin
Title: Vice President
The Bank of New York
Date: May 14, 2003
The Registrant, Eastern American Natural Gas Trust, has no principal
executive officer, principal financial officer, board of directors or persons
performing similar functions. Accordingly no additional signatures are
available and none have been provided.
CERTIFICATION
I, Robert L. Griffin certify that:
1. I have reviewed this quarterly report on Form 10-Q of Eastern
American Natural Gas Trust, for which The Bank of New York acts as
Trustee;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
distributable income and changes in trust corpus to of the
registrant as of, and for, the periods presented in this quarterly
report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14), or for causing such controls and procedures to be
established and maintained, for the registrant and have:
a) designed such disclosure controls and procedures, or caused
such controls and procedures to be designed, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by other within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report my conclusion about the
effectiveness of the disclosure controls and procedures based
on my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and;
b) any fraud, whether or not material, that involves any persons
who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the
date of my most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
In giving the foregoing certifications in paragraph 4, 5 and 6
above, I have relied to the extent I consider reasonable on
information provided to me by Eastern American Energy Corporation
and Ryder Scott Company, Independent Petroleum Engineers.
/s/ Robert L. Griffin
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Vice President
The Bank of New York
Date: May 14, 2003
02662.0161 #404581v2