Texas
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58-6379215
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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U.S.
Trust, Bank of America
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Private
Wealth Management
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P.O.
Box 830650, Dallas, Texas
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75283-0650
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(Address
of principal executive offices)
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(Zip
Code)
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Large
accelerated filer þ
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Accelerated
filer ¨
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Non-accelerated
filer ¨
(Do not check if a smaller reporting company)
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Smaller
reporting company ¨
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TABLE OF CONTENTS | ||
Page
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Bbl
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Barrel
(of oil)
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Mcf
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Thousand
cubic feet (of natural gas)
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MMBtu
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One
million British Thermal Units, a common energy
measurement
|
net
proceeds
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Gross
proceeds received by XTO Energy from sale of production from the
underlying properties, less applicable costs, as defined in the net
profits interest conveyances
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net
profits income
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Net
proceeds multiplied by the net profits percentage of 80%, which is
paid to
the trust by XTO Energy. “Net profits income” is referred to as “royalty
income” for tax reporting purposes.
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net
profits interest
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An
interest in an oil and gas property measured by net profits from
the sale
of production, rather than a specific portion of production. The
following
defined net profits interests were conveyed to the trust from the
underlying properties:
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80%
net profits interests - interests that entitle the trust to receive
80% of the net proceeds from the underlying properties.
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underlying
properties
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XTO
Energy’s interest in certain oil and gas properties from which the net
profits interests were conveyed. The underlying properties include
working
interests in predominantly gas-producing properties located in Kansas,
Oklahoma and Wyoming.
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working
interest
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An
operating interest in an oil and gas property that provides the owner
a
specified share of production that is subject to all production expense
and development costs
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September 30,
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December 31,
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||||||
2008
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2007
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||||||
(Unaudited)
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|||||||
ASSETS
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|||||||
Cash
and short-term investments
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$
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16,177,840
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$
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5,214,000
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|||
Net
profits interests in oil and gas properties - net (Note 1)
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148,258,868
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155,820,033
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|||||
$
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164,436,708
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$
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161,034,033
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||||
LIABILITIES
AND TRUST CORPUS
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|||||||
Distribution
payable to unitholders
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$
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16,177,840
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$
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5,214,000
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|||
Trust
corpus (40,000,000 units of beneficial interest authorized and
outstanding)
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148,258,868
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155,820,033
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|||||
$
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164,436,708
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$
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161,034,033
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Three Months Ended
September 30
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Nine Months Ended
September 30
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||||||||||||
2008
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2007
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2008
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2007
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||||||||||
Net
profits income
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$
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43,741,409
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$
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17,870,756
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$
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99,676,511
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$
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55,857,387
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|||||
Interest
income
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31,050
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38,226
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73,801
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107,395
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|||||||||
Total
income
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43,772,459
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17,908,982
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99,750,312
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55,964,782
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|||||||||
Administration
expense
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83,819
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174,302
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737,592
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1,141,822
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|||||||||
Distributable
income
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$
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43,688,640
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$
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17,734,680
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$
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99,012,720
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$
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54,822,960
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|||||
Distributable
income per unit (40,000,000 units)
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$
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1.092216
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$
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0.443367
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$
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2.475318
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$
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1.370574
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Three Months Ended
September 30
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Nine Months Ended
September 30
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||||||||||||
2008
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2007
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2008
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2007
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||||||||||
Trust
corpus, beginning of period
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$
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151,013,766
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$
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159,594,894
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$
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155,820,033
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$
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163,796,772
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|||||
Amortization
of net profits interests
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(2,754,898
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)
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(2,061,219
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)
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(7,561,165
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)
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(6,263,097
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)
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|||||
Distributable
income
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43,688,640
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17,734,680
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99,012,720
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54,822,960
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|||||||||
Distributions
declared
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(43,688,640
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)
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(17,734,680
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)
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(99,012,720
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)
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(54,822,960
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)
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|||||
Trust
corpus, end of period
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$
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148,258,868
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$
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157,533,675
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$
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148,258,868
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$
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157,533,675
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1. |
Basis
of Accounting
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B
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Net
profits income recorded for a month is the amount computed and paid
by XTO
Energy Inc., the owner of the underlying properties, to Bank of America,
N.A., as trustee for the trust. Net profits income consists of net
proceeds received by XTO Energy from the underlying properties in
the
prior month, multiplied by a net profits percentage of
80%.
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B
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Net
profits income is computed separately for each of three conveyances
under
which the net profits interests were conveyed to the trust. If monthly
costs exceed revenues for any conveyance, such excess costs must
be
recovered, with accrued interest, from future net proceeds of that
conveyance and cannot reduce net proceeds from the other
conveyances.
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B
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Trust
expenses are recorded based on liabilities paid and cash reserves
established by the trustee for liabilities and
contingencies.
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B
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Distributions
to unitholders are recorded when declared by the
trustee.
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2. |
Development
Costs
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Three
Months Ended
September
30
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Nine
Months Ended
September
30
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||||||||||||
2008
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2007
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2008
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2007
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||||||
Cumulative
actual costs under (over) the amount deducted - beginning of
period
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$
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4,729,172
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$
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3,050,773
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$
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(675,754
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)
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$
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(3,410,174
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)
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|||
Actual
costs
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(19,937,960
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)
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(11,843,853
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)
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(37,033,034
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)
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(25,632,906
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)
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|||||
Budgeted
costs deducted
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11,500,000
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11,250,000
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34,000,000
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31,500,000
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|||||||||
$
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(3,708,788
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)
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$
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2,456,920
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$
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(3,708,788
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)
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$
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2,456,920
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3. |
Contingencies
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4. |
Excess
Costs
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Record Date
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Payment Date
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Distribution
per Unit
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|||||
July
31, 2008
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August 14, 2008
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$
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0.359084
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||||
August
29, 2008
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September 15, 2008
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0.328686
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|||||
September
30, 2008
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October 15, 2008
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0.404446
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|||||
$
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1.092216
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- |
oil
and gas sales volumes,
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- |
oil
and gas sales prices, and
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- |
costs
deducted in the calculation of net profits
income.
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Three Months
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Nine Months
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||||||||||||||||||
Ended September 30 (a)
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Increase
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Ended September 30 (a)
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Increase
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||||||||||||||||
2008
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2007
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(Decrease)
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2008
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2007
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(Decrease)
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||||||||||||||
Sales
Volumes
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|||||||||||||||||||
Gas
(Mcf) (b)
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|||||||||||||||||||
Underlying
properties
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7,100,403
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6,980,106
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2
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%
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21,368,077
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20,838,899
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3
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%
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|||||||||||
Average
per day
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77,178
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75,871
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2
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%
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77,986
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76,333
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2
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%
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|||||||||||
Net
profits interests
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3,977,121
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2,903,001
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37
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%
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10,915,817
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8,820,209
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24
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%
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|||||||||||
Oil
(Bbls) (b)
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|||||||||||||||||||
Underlying
properties
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94,751
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76,832
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23
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%
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263,779
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223,555
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18
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%
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|||||||||||
Average
per day
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1,030
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835
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23
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%
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963
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819
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18
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%
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|||||||||||
Net
profits interests
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55,308
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33,044
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67
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%
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140,239
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106,310
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32
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%
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|||||||||||
Average
Sales Prices
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|||||||||||||||||||
Gas
(per Mcf)
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$
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10.15
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$
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5.93
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71
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%
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$
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8.29
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$
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6.02
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38
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%
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|||||||
Oil
(per Bbl)
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$
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125.74
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$
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65.14
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93
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%
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$
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108.41
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$
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60.41
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79
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%
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|||||||
Revenues
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|||||||||||||||||||
Gas
sales
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$
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72,074,994
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$
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41,401,782
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74
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%
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$
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177,195,695
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$
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125,515,708
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41
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%
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|||||||
Oil
sales
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11,913,831
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5,005,105
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138
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%
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28,595,710
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13,505,539
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112
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%
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|||||||||||
Total
Revenues
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83,988,825
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46,406,887
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81
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%
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205,791,405
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139,021,247
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48
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%
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|||||||||||
Costs
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|||||||||||||||||||
Taxes,
transportation and other
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7,187,902
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4,642,514
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55
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%
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18,627,823
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14,096,130
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32
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%
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|||||||||||
Production
expense
|
8,031,499
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5,860,762
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37
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%
|
20,425,623
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16,876,291
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21
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%
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|||||||||||
Development
costs (c)
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11,500,000
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11,250,000
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2
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%
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34,000,000
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31,500,000
|
8
|
%
|
|||||||||||
Overhead
|
2,592,663
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2,315,166
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12
|
%
|
7,278,762
|
6,727,092
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8
|
%
|
|||||||||||
Excess
costs (d)
|
-
|
-
|
-
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863,558
|
-
|
-
|
|||||||||||||
Total
Costs
|
29,312,064
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24,068,442
|
22
|
%
|
81,195,766
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69,199,513
|
17
|
%
|
|||||||||||
Net
Proceeds
|
54,676,761
|
22,338,445
|
145
|
%
|
124,595,639
|
69,821,734
|
78
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%
|
|||||||||||
Net
Profits Percentage
|
80
|
%
|
80
|
%
|
80
|
%
|
80
|
%
|
|||||||||||
Net
Profits Income
|
$
|
43,741,409
|
$
|
17,870,756
|
145
|
%
|
$
|
99,676,511
|
$
|
55,857,387
|
78
|
%
|
(a) |
Because
of the two-month interval between time of production and receipt
of net
profits income by the trust, (1) oil and gas sales for the quarter
ended September 30 generally represent production for the period
May
through July and (2) oil and gas sales for the nine months ended
September 30 generally represent production for the period November
through July.
|
(b) |
Oil
and gas sales volumes are allocated to the net profits interests
based upon a formula that considers oil and gas prices and the total
amount of production expense and development costs. Changes in any
of
these factors may result in disproportionate fluctuations in volumes
allocated to the net profits interests. Therefore, comparative
discussion of oil and gas sales volumes is based on the
underlying properties.
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(c)
|
See
Note 2 to Condensed Financial
Statements.
|
(d)
|
See
Note 4 to Condensed Financial
Statements.
|
(a)
|
Exhibits.
|
Exhibit
Number
|
|
and
Description
|
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(15)
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Awareness
letter of KPMG LLP
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(31)
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Rule
13a-14(a)/15d-14(a) Certification
|
(32)
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Section
1350 Certification
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(99)
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Items
1A, 7 and 7A to the Annual Report on Form 10-K for Hugoton Royalty
Trust
filed with the Securities and Exchange Commission on February 26,
2008
(incorporated herein by reference)
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HUGOTON
ROYALTY TRUST
|
||
By
BANK OF AMERICA, N.A., TRUSTEE
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||
By
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/s/
Nancy G. Willis
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Nancy
G. Willis
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Vice
President
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XTO
ENERGY INC.
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Date:
October 29, 2008
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By
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/s/
Louis G. Baldwin
|
Louis
G. Baldwin
|
||
Executive
Vice President
|
||
and
Chief Financial Officer
|