Overview.
Kiewit Royalty Trust (the "Trust") is a royalty trust with royalty and
overriding royalty interests in certain coal leases. The Trust was formed for
the purposes of administering the income received from such coal leases and
distributing such income (together with interest earned thereon, if any, less
payment of or provision for obligations) to the holders of the units of
beneficial interest.
During the three month period ended March 31, 2021, the Trust received a total
of $97,261 of royalty and overriding royalty payments from the Decker Mines. The
following table reflects the royalty and overriding royalty payments, net of
production expenses, received by the Trust at the following mines:
Three Months Ended March 31,
2021 2020
Decker Mine $ 97,261 $ 600,737
Spring Creek Mine - -
Total Royalty Income $ 97,261 $ 600,737Decker Mine. Royalty and overriding royalty amounts received by the Trust from
the Decker Mine during the first three months of 2021, decreased significantly
by $503,476, or 84%, to $97,261 as compared to $600,737 received during the same
period in 2020. The Decker Mine includes West Decker and East Decker Mine
leases. Until 2021, when the Decker Mine announced cessation of mining
activities, the primary producer currently was an East Decker Mine, which in
recent years was the only lease actively producing. The changes this quarter
resulted from fewer tons of coal produced due to the cession of mine operations.
In December 2020, Lighthouse Resources, Inc., the owner of the Decker Mine,
filed for Chapter 11 bankruptcy, in the United States Bankruptcy Court for the
District of Delaware (Case No. 20-13056(JTD)). Lighthouse initially reduced
operations at the Decker Mine, and in February 2021, the Decker Mine ceased
operations. The Trust is actively monitoring the bankruptcy filings, and is an
unsecured creditor in the bankruptcy case. In light of the pending bankruptcy,
the Trust is currently uncertain whether it will receive additional royalty
payments from the Decker Mine or the status of its interest in the royalty
leases. At this time, no additional royalty payments are anticipated in the near
future.
Spring Creek Mine. No royalties were received from the Spring Creek Mine during
the first three months of 2021 and 2020 because historically, royalties with
respect to this mine typically were paid by the mine operators on an annual
basis during the second half of the calendar year. However, it is unknown
whether the Trust will receive additional royalties from this mine in the future
due to various factors, including the financial struggles of the coal operator,
the lack of mining activities in the applicable mines, and the general depletion
of coal. In 2019, the Spring Creek Mine was sold to Navajo Transitional Energy
Company ("NTEC"), which is wholly owned by the Navajo Nation, and is currently
operating the mine as a contract operator. Since the transition to NTEC, the
Mine shut down briefly and has continued to have operational issues which are
unrelated to the COVID-19 pandemic. These operational issues, together with
general economic issues impacting coal mines, are challenging and make it
difficult for the Trust to predict the long-term status of the operations of
this mine. The Trust intends to continue monitoring the new ownership by NTEC.
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It is unknown whether the Trust will receive additional royalties from this mine
in the future due to various factors, including the financial struggles of the
coal operator, the lack of mining activities in the applicable mines, and the
general depletion of coal.
Other Mines. In addition to the Decker Mine and Spring Creek Mine, the Trust
also owns rights in lease number 027475 in the Black Butte Mine in Sweetwater
County, Wyoming. Such mine is not producing but is active and continues to be
part of future mining plans.
Interest Income. During the three months ended March 31, 2021 and March 31,
2020, the Trust earned a nominal amount of interest.
Trust Expenses. Trust expenses increased and were $42,446 in the first three
months of 2021 as compared to $25,000 for the same period in 2020. Trust
expenses generally include fees of the Trustee, accountants, attorneys, and
other professionals that the Trustee employs in the administration of the Trust.
The increase in expenses resulted from the timing of when invoices were received
and paid as well as additional legal expenses to address the Decker Mine
bankruptcy filing.
Liquidity and Capital Resources. The Trust's primary source of liquidity is the
royalty payments. In accordance with the provisions of the Trust Indenture,
generally all income received by the Trust, net of Trust expenses and any
amounts placed in reserves, is distributed to the Unit Holders on a biannual
basis. At this time, the Trust does not expect to make any distributions in the
near future due to the Trust's liquidity issues. The Trust has suspended future
distribution payments in light of the substantial reduction in royalty income.
Trust Reserves. During the first quarter of 2021, the Trust's distributable
income was $54,816. Historically, this amount would have been reserved to be
paid within 10 days of June 30, which is the Trust's next distribution payment
date. However, such amount will be held as a reserve. Because of the uncertainty
of the Decker Mine, the Trust intends to temporarily suspend all distribution
payments and instead reserve such amounts to cover future expenses. Due to the
uncertainty with respect to timing or amount of future royalty payments, the
Trust believes such suspension is in its best interests.
During the first quarter of 2020, the Trust's distributable income was $576,223
and was paid to Unit Holders in July 2020. The Trust currently pays biannual
distributions within 10 days after June 30 and December 31 of each year to the
extent funds are available.
In April 2021, the Trust received a payment from the Decker mine in the amount
of $44,874. The Trust intends to reserve this amount as well as any additional
royalty payments received to cover future expenses.
Going Concern. The Trust may not have sufficient funding in order to continue to
operate. The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Trust's continuation as a
going concern is dependent upon continued mining activities and receipt of
timely royalty payments form the mines, especially the Decker Mine. Because of
the Trust's limited source of revenues, the recent bankruptcy of the Decker Mine
raises substantial doubt about the Trust's ability to continue as a going
concern. The Trust's financial statements currently do not include any
adjustments that might result from the outcome of any uncertainly as to the
Trust's ability to continue as a going concern.
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Change in Trust Corpus. During the first three months of 2021, the trust corpus
remained unchanged.
Off-Balance Sheet Arrangements. As required by the Trust Indenture, the Trust is
intended to be passive in nature and the Trustee does not have any control over
or any responsibility relating to the operation of the mines under which the
Trust has any royalty interests and overriding royalty interests. The Trustee
has powers to collect and distribute proceeds received by the Trust and pay
Trust liabilities and expenses and its actions have been limited to those
activities. As a result, the Trust has not engaged in any off-balance sheet
arrangements.
Critical Accounting Policies and Estimates. The Trust's condensed financial
statements are prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than accounting principles generally
accepted in the United States of America, and as such there are no critical
accounting policies or estimates.
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KIEWIT ROYALTY TRUST 
