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<SEC-DOCUMENT>0000950134-04-016663.txt : 20041108
<SEC-HEADER>0000950134-04-016663.hdr.sgml : 20041108
<ACCEPTANCE-DATETIME>20041108064342
ACCESSION NUMBER:		0000950134-04-016663
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041108
DATE AS OF CHANGE:		20041108

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SABINE ROYALTY TRUST
		CENTRAL INDEX KEY:			0000710752
		STANDARD INDUSTRIAL CLASSIFICATION:	OIL ROYALTY TRADERS [6792]
		IRS NUMBER:				756297143
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08424
		FILM NUMBER:		041124157

	BUSINESS ADDRESS:	
		STREET 1:		PO BOX 830650
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75283-0650
		BUSINESS PHONE:		2145082400

	MAIL ADDRESS:	
		STREET 1:		PO BOX 830650
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75283-0650
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d19339e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


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<P align="center" style="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<P align="center" style="font-size: 18pt"><B>Form&nbsp;10-Q</B>


<P align="center" style="font-size: 12pt"><FONT face="Wingdings">&#120;</FONT> Quarterly Report Pursuant to Section&nbsp;13 or 15(d)<BR>
of the Securities Exchange Act of 1934

<DIV align="center" style="font-size: 10pt">For the quarterly period ended September&nbsp;30, 2004</DIV>


<P align="center" style="font-size: 10pt">OR


<P align="center" style="font-size: 12pt"><FONT face="Wingdings">&#111;</FONT> Transition Report Pursuant to Section&nbsp;13 or 15(d)<BR>
of the Securities Exchange Act of 1934

<DIV align="center" style="font-size: 10pt">For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></DIV>


<P align="center" style="font-size: 10pt">Commission File Number: 1-8424

<P align="center" style="font-size: 24pt"><B>SABINE ROYALTY TRUST</B>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">75-6297143</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">of incorporation or
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">organization</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">Trust Division<BR>
Bank of America, N.A.<BR>
Bank of America Plaza<BR>
901 Main Street<BR>
17th Floor<BR>
Dallas, Texas 75202<BR>
(Address of principal executive offices)<BR>
(Zip Code)


<P align="center" style="font-size: 10pt">(214)&nbsp;209-2400<BR>
(Registrant&#146;s telephone number, including area code)

<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required
to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12&nbsp;months (or for such shorter period that the registrant was
required to file such reports) and (2)&nbsp;has been subject to such filing
requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#120;</FONT> No <FONT face="Wingdings">&#111;</FONT>

<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Exchange Act).

<P align="left" style="font-size: 10pt">Yes <FONT face="Wingdings">&#120;</FONT> No <FONT face="Wingdings">&#111;</FONT>

<P align="left" style="font-size: 10pt">Number of units of beneficial interest outstanding at November&nbsp;2, 2004:
14,579,345


<P>
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<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART I &#151; FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;1. Financial Statements.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item&nbsp;2. Trustee&#146;s Discussion and Analysis of Financial Condition and Results of Operations.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item&nbsp;4. Controls and Procedures.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">PART II &#151; OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;6. Exhibits.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="d19339exv31.htm">Trustee Certification pursuant to Section 302</A></TD></TR>
<TR><TD colspan="9"><A HREF="d19339exv32.htm">Trustee Certification pursuant to 18 U.S.C. Section 1350</A></TD></TR>
</TABLE>
</CENTER>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>





<P align="center" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>

<!-- link1 "PART I &#151; FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center" style="font-size: 10pt">PART I &#151; FINANCIAL INFORMATION


<!-- link2 "Item&nbsp;1. Financial Statements." -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left" style="font-size: 10pt"><I>Item&nbsp;1. Financial
Statements.</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The condensed financial statements included herein have been prepared
by Bank of America, N.A. (as successor to NationsBank, N.A.), as Trustee (the
&#147;Trustee&#148;) of Sabine Royalty Trust (the &#147;Trust&#148;), pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial statements have been
condensed or omitted pursuant to such rules and regulations, although the
Trustee believes that the disclosures are adequate to make the information
presented not misleading. The condensed financial statements of the Trust
presented herein are unaudited except for the balances as of December&nbsp;31, 2003,
and, therefore are subject to year-end adjustments. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Trust&#146;s latest annual report on
Form 10-K. The December&nbsp;31, 2003 balance sheet is derived from the audited
balance sheet of that date. In the opinion of the Trustee, all adjustments
necessary to present fairly the assets, liabilities and trust corpus of the
Trust as of September&nbsp;30, 2004, the distributable income for the three-month and
nine-month periods ended September&nbsp;30, 2004 and 2003 and the changes in trust
corpus for the nine-month periods ended September&nbsp;30, 2004 and 2003, have been
included. The distributable income for such interim periods is not necessarily
indicative of the distributable income for the full year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The condensed financial statements as of September&nbsp;30, 2004 and for the
three-month and nine-month periods ended September&nbsp;30, 2004 and 2003, included
herein, have been reviewed by Deloitte &#038; Touche LLP, an independent registered
public accounting firm, as stated in their report appearing herein.


<P align="center" style="font-size: 10pt">2
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM</B>


<P align="left" style="font-size: 10pt">Unit Holders of Sabine Royalty Trust and<BR>
Bank of America, N.A., Trustee

<P align="left" style="font-size: 10pt">We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of Sabine Royalty Trust as of September&nbsp;30, 2004, and the related
condensed statements of distributable income for the three-month and nine-month
periods ended September&nbsp;30, 2004 and 2003 and changes in trust corpus for the
nine-month periods ended September&nbsp;30, 2004 and 2003. These condensed financial
statements are the responsibility of the Trustee.

<P align="left" style="font-size: 10pt">We conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

<P align="left" style="font-size: 10pt">As described in Note 2 to the condensed financial statements, these condensed
financial statements have been 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.

<P align="left" style="font-size: 10pt">Based on our reviews, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
the basis of accounting described in Note 2.

<P align="left" style="font-size: 10pt">We have previously audited, in accordance with standards of the Public
Company Accounting Oversight Board (United States), the statement of assets,
liabilities and trust corpus of Sabine Royalty Trust as of December&nbsp;31, 2003,
and the related statements of distributable income and changes in trust corpus
for the year then ended (not presented herein); and in our report dated March&nbsp;9,
2004, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed statement of
assets, liabilities and trust corpus as of December&nbsp;31, 2003, is fairly stated,
in all material respects, in relation to the statement of assets, liabilities
and trust corpus from which it has been derived.


<P align="left" style="font-size: 10pt">/s/ Deloitte &#038; Touche LLP


<P align="left" style="font-size: 10pt">Dallas, Texas<BR>
November 5, 2004


<P align="center" style="font-size: 10pt">3
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>


<P align="left" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF ASSETS,<BR>
LIABILITIES AND TRUST CORPUS</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="font-weight:bold"><B>September 30, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Notes</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="font-weight:bold"><B>(Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">4,104,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,247,094</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Royalty interests in oil
and gas properties
(less accumulated
amortization of
$21,218,222 and
$21,087,234 at
September&nbsp;30, 2004 and
December&nbsp;31, 2003)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">1,176,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,307,951</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">5,281,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,555,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><b>Liabilities and Trust Corpus</b></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trust expenses payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">127,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">427,982</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">150,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426,070</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">277,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trust corpus - 14,579,345
units of beneficial
interest authorized, issued
and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">5,004,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,700,993</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">5,281,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,555,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The accompanying notes are an integral part of these condensed financial
statements.


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>


<P align="left" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF
DISTRIBUTABLE INCOME (UNAUDITED)</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Notes</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="font-weight:bold"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Royalty income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">11,983,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,741,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">13,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,593</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">11,997,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,753,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">General and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">(385,400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(372,551</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributable income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">11,612,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,380,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributable income
per unit (basic and
assuming dilution)
(14,579,345 units)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,3,5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The accompanying notes are an integral part of these condensed financial
statements.


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>


<P align="left" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF
DISTRIBUTABLE INCOME (UNAUDITED)</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Notes</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="font-weight:bold"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Royalty income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">32,068,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,856,187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">30,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,026</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">32,099,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,894,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">General and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">(1,365,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,392,328</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributable income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">30,734,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,501,885</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributable income
per unit (basic and
assuming dilution)
(14,579,345 units)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,3,5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">2.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The accompanying notes are an integral part of these condensed financial
statements.


<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>


<P align="left" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF
CHANGES IN TRUST CORPUS (UNAUDITED)</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" style="font-weight:bold"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Note</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="font-weight:bold"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trust corpus, beginning
of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">4,700,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,603,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortization of royalty
interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">(130,988</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(163,552</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributable income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">30,734,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,501,885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold">(30,300,401</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28,561,816</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trust corpus, end
of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">5,004,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,379,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Distributions per unit
(14,579,345 units)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">$</TD>
    <TD align="right" style="font-weight:bold">2.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="font-weight:bold">&nbsp;</TD>
    <TD align="right" style="font-weight:bold"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The accompanying notes are an integral part of these condensed financial
statements.


<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>SABINE ROYALTY TRUST</B>


<P align="left" style="font-size: 10pt"><B>NOTES TO CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)</B>


<P align="left" style="font-size: 10pt"><B>1. TRUST ORGANIZATION AND
PROVISIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sabine Royalty Trust (the &#147;Trust&#148;) was established by the Sabine
Corporation Royalty Trust Agreement (the &#147;Trust Agreement&#148;), made and entered
into effective as of December&nbsp;31, 1982, to receive a distribution from Sabine
Corporation (&#147;Sabine&#148;) of royalty and mineral interests, including landowner&#146;s
royalties, overriding royalty interests, minerals (other than executive rights,
bonuses and delay rentals), production payments and any other similar,
nonparticipatory interests, in certain producing and proved undeveloped oil and
gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma
and Texas (the &#147;Royalties&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificates evidencing units of beneficial interest (the &#147;Units&#148;) in the
Trust were mailed on December&nbsp;31, 1982 to Sabine&#146;s shareholders of record on
December&nbsp;23, 1982, on the basis of one Unit for each share of Sabine&#146;s
outstanding common stock. In May&nbsp;1988, Sabine was acquired by Pacific
Enterprises (&#147;Pacific&#148;), a California corporation. Through a series of mergers,
Sabine was merged into Pacific Enterprises Oil Company (USA) (&#147;Pacific (USA)&#148;),
a California corporation and a wholly owned subsidiary of Pacific, effective
January&nbsp;1, 1990. This acquisition and the subsequent mergers had no effect on
the Units. Pacific (USA), as successor to Sabine, has assumed by operation of
law all of Sabine&#146;s rights and obligations with respect to the Trust. The Units
are listed and traded on the New York Stock Exchange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the transfer of the Royalties to the Trust upon its
formation, Sabine had reserved to itself all executive rights, including rights
to execute leases and to receive bonuses and delay rentals. In January&nbsp;1993,
Pacific (USA)&nbsp;completed the sale of substantially all its producing oil and gas
assets to a third party. The sale did not include executive rights relating to
the Royalties, and Pacific (USA)&#146;s ownership of such rights was not affected by
the sale.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank of America, N.A. (the &#147;Trustee&#148;), acts as trustee of the Trust. The
terms of the Trust Agreement provide, among other things, that:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trust shall not engage in any business or commercial activity of any kind
or acquire assets other than those initially transferred to the Trust.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trustee may not sell all or any part of its assets unless approved by the
holders of a majority of the outstanding Units in which case the sale must be
for cash and the proceeds, after satisfying all existing liabilities,
promptly distributed to Unit holders.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trustee may establish a cash reserve for the payment of any liability
that is contingent or uncertain in amount or that otherwise is not currently
due or payable.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trustee will use reasonable efforts to cause the Trust and the Unit
holders to recognize income and expenses on monthly record dates.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trustee is authorized to borrow funds to pay liabilities of the Trust
provided that such borrowings are repaid in full before any further
distributions are made to Unit holders.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Trustee will make monthly cash distributions to Unit holders of record on
the monthly record date (see Note 3).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the passive nature of the Trust and the restrictions and
limitations on the powers and activities of the Trustee contained in the Trust
Agreement, the Trustee does not consider any of the officers and employees of
the Trustee to be &#147;officers&#148; or &#147;executive officers&#148; of the Trust as such terms
are defined under applicable rules and regulations adopted under the Securities
Exchange Act of 1934.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proceeds of production from the Royalties are receivable from hundreds
of separate payors. In order to facilitate creation of the Trust and to avoid
the administrative expense and inconvenience of daily reporting to Unit holders,
the conveyances by Sabine of the Royalties located in five of the six states
provided for the execution of an escrow agreement by Sabine and the initial
trustee of the Trust, in its capacities as trustee of the Trust and as escrow
agent. The conveyances by Sabine of the Royalties located in Louisiana provided
for the execution of a substantially identical escrow agreement by Sabine and a
Louisiana bank in the capacities of escrow agent and of trustee under the name
of Sabine Louisiana Royalty Trust. Sabine Louisiana Royalty Trust, the sole
beneficiary of which is the Trust, was established in order to avoid uncertainty
under Louisiana law as to the legality of the Trustee&#146;s holding record title to
the Royalties located in Louisiana. As of December&nbsp;31, 2001, Bank of America has
assumed the responsibilities and functions as escrow agent and trustee of the
Sabine Louisiana Royalty Trust.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of the escrow agreements and the conveyances of the
properties by Sabine, the proceeds of production from the Royalties for each
calendar month, and interest thereon, are collected by the escrow agents and are
paid to and received by the Trust only on the next monthly record date. The
escrow agents have agreed to endeavor to assure that they incur and pay expenses
and fees for each calendar month only on the next monthly record date. The Trust
Agreement also provides that the Trustee is to endeavor to assure that income of
the Trust will be accrued and received and expenses of the Trust will be
incurred and paid only on each monthly record date. Assuming that the escrow
agreements are recognized for Federal income tax purposes and that the Trustee
and escrow agents are able to control the timing of income and expenses, as
stated above, cash and accrual basis Unit holders should be treated as realizing
income only on each monthly record date. The Trustee is treating the escrow
agreements as effective for tax purposes. However, for financial reporting
purposes, royalty and interest income are recorded in the calendar month in
which the amounts are received by either the escrow agents or the Trust.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributable income as determined for financial reporting purposes for a
given quarter will not usually equal the sum of distributions made during that
quarter. Distributable income for a given quarter will approximate the sum of
the distributions made during the last two months of such quarter and the first
month of the next quarter.


<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>2. ACCOUNTING POLICIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis of Accounting


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of the Trust are prepared on the following basis
and are not intended to present financial position and results of operations in
conformity with accounting principles generally accepted in the United States of
America (&#147;GAAP&#148;):


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalty income, net of severance and ad valorem tax, and interest income are
recognized in the month in which amounts are received by the Trust (see Note
1).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trust expenses, consisting principally of routine general and administrative
costs, include payments made during the accounting period. Expenses are
accrued to the extent of amounts that become payable on the next monthly
record date following the end of an accounting period. Reserves for
liabilities that are contingent or uncertain in amount may also be
established if considered necessary.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalties that are producing properties are amortized using the unit-of-
production method. This amortization is shown as a reduction of Trust corpus.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distributions to Unit holders are recognized when declared by the Trustee
(see Note 3).</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of the Trust differ from financial statements
prepared in conformity with accounting principles generally accepted in the
United States of America because of the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalty income is recognized in the month received rather than in the month
of production.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expenses other than those expected to be paid on the following monthly record
date are not accrued.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amortization of the Royalties is shown as a reduction to Trust Corpus and not
as a charge to operating results.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reserves may be established for contingencies that would not be recorded
under accounting principles generally accepted in the United States of
America.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This comprehensive basis of accounting other than GAAP corresponds to the
accounting permitted for royalty trusts by the U.S. Securities and Exchange
Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with the basis of
accounting described above requires management to make estimates and assumptions
that affect reported amounts of certain assets, liabilities, revenues and
expenses as of and for the reporting periods. Actual results may differ from
such estimates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trustee routinely reviews the Trust&#146;s royalty interests in oil and gas
properties for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If an impairment event
occurs and it is determined that the carrying value of the Trust&#146;s royalty
interests may not be recoverable, an impairment will be recognized as measured
by the amount by which the carrying amount of the royalty interests exceeds the
fair value of these assets, which would likely be measured by discounting
projected cash flows.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributable Income per Unit


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per Unit is computed by dividing net income by the weighted
average Units outstanding. Earnings per Unit assuming dilution is computed by
dividing net income by the weighted average number of Units and equivalent
Units outstanding. The Trust had no equivalent Units outstanding for any period
presented. Basic and assuming dilution distributable income per Unit are the
same.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal Income Taxes


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Internal Revenue Service has ruled that the Trust is classified as a
grantor trust for Federal income tax purposes and therefore is not subject to
taxation at the trust level. The Unit holders are considered, for Federal income
tax purposes, to own the Trust&#146;s income and principal as though no trust were in
existence. Accordingly, no provision for Federal income tax expense has been
made in these financial statements. The income of the Trust will be deemed to
have been received or accrued by each Unit holder at the time such income is
received or accrued by the Trust if the escrow arrangements discussed in Note 1
to these financial statements are respected by the Internal Revenue Service. In
the absence of the escrow arrangements, Unit holders would be deemed to receive
or accrue income from production from the royalty properties (and interest
income) on a daily basis, in accordance with their method of accounting, as the
proceeds from production and interest thereon were received or accrued by the
Trust. The Trustee is treating the escrow arrangements as effective for tax
purposes and furnishes tax information to Unit holders on that basis.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Unit holder should consult his tax advisor regarding Trust tax
compliance matters.


<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>3. DISTRIBUTION TO UNIT
HOLDERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amount to be distributed to Unit holders (&#147;Monthly Income Amount&#148;) is
determined on a monthly basis. The Monthly Income Amount is an amount equal to
the sum of cash received by the Trust during a monthly period (the period
commencing on the day after a monthly record date and continuing through and
including the next succeeding monthly record date) attributable to the
Royalties, any reduction in cash reserves and any other cash receipts of the
Trust, including interest, reduced by the sum of liabilities paid and any
increase in cash reserves. Unit holders of record as of the monthly record date
(the 15th day of each calendar month except in limited circumstances) are
entitled to have distributed to them the calculated Monthly Income Amount for
such month on or before 10 business days after the monthly record date. The
Monthly Income Amount per Unit is declared by the Trust no later than 10&nbsp;days
prior to the monthly record date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cash received by the Trust from purchasers of the Trust&#146;s oil and gas
production consists of gross sales of production less applicable severance
taxes.


<P align="left" style="font-size: 10pt"><B>4. PAYABLES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other payables consist primarily of royalty receipts suspended pending
verification of ownership interest or title.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trustee believes that these other payables represent an ordinary
operating condition of the Trust and that such payables will be paid or released
in the normal course of business.


<P align="left" style="font-size: 10pt"><B>5. SUBSEQUENT EVENTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to September&nbsp;30, 2004, the Trust declared the following
distributions:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Monthly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Record</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Payment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Distribution</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Date</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>per Unit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">October 15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">October 29</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.26336</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">November 15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">November 29</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.20490</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>6. CONTINGENCIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contingencies related to the royalty properties that are unfavorably
resolved would generally be reflected by the Trust as reductions to future
royalty income payments to the Trust with corresponding reductions to cash
distributions to Unit holders. The Trustee is aware of no such items as of
November 5, 2004.


<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;2. Trustee&#146;s Discussion and Analysis of Financial Condition and Results of Operations." -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="left" style="font-size: 10pt"><I>Item&nbsp;2.
Trustee&#146;s Discussion and Analysis of Financial Condition and
Results of Operations.</I>



<P align="left" style="font-size: 10pt"><B>Liquidity and Capital
Resources</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trust makes monthly distributions to the holders of Units of the excess
of the preceding month&#146;s revenues received over expenses incurred. Upon receipt,
royalty income is invested in short-term investments until its subsequent
distribution. In accordance with the Trust Agreement, the Trust&#146;s only long-term
assets consist of royalty interests in producing and proved undeveloped oil and
gas properties. Although the Trust is permitted to borrow funds if necessary to
continue its operations, borrowings are not anticipated in the foreseeable
future.


<P align="left" style="font-size: 10pt"><B>Results of Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributable income consists of royalty income plus interest income plus
any decrease in cash reserves established by the Trustee less general and
administrative expenses of the Trust less any increase in cash reserves
established by the Trustee. Distributable income for the three months ended
September&nbsp;30, 2004 was $11,612,165 or $.80 per Unit. Royalty income amounted to
$11,983,605 while interest income was $13,960. General and administrative
expenses totaled $385,400.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions during the period were $.22614, $.23616, and $.29537 per Unit
payable to Unit holders of record on July&nbsp;15, August&nbsp;16, and September&nbsp;15, 2004,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Royalty income for the quarter ended September&nbsp;30, 2004 increased
approximately $2,242,000, or 23%, compared with the third quarter of 2003 due to
increases in the prices of oil and gas. These increases were offset somewhat by
decreases in the production of both oil and gas. Compared to the preceding
quarter ended June&nbsp;30, 2004, royalty income increased approximately $1,608,000,
or 15%, due to increases in the price of both oil and gas. These increases were
tempered by decreases in the production of both oil and gas. Royalty income for
the nine-month period ended September&nbsp;30, 2004 increased approximately
$2,213,000, or 7%, compared to the first nine months of 2003 due primarily to
increases in the price of both oil and gas. These increases were offset somewhat
by decreases in both oil and gas production.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Royalty
income in the third quarter of 2004 includes a refund the Trust received
from the State of Oklahoma
in the amount of $510,271. This refund represented taxes that were
withheld from the proceeds of production from the Royalties and remitted to the State of
Oklahoma by purchasers. Income taxes are not payable by the Trust, but are the
responsibility of the individual Unit holders. Therefore, the State of Oklahoma
refunded the withheld taxes, and the refund is included in the Trust&#146;s
distributable income for the Unit holders for October 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables illustrate average prices received for the periods
discussed above and the related oil and gas production volumes:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Quarter Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Production</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil (Bbls)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas (Mcfs)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,529,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,707,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,555,341</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil(per Bbl)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas (per Mcf)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.54</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine-Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Production</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil (Bbls)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas (Mcfs)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,643,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,883,802</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil (per Bbl)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas (per Mcf)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.45</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gas revenues received for the three months ended September&nbsp;30, 2004,
related primarily to production for April through June. The average price of gas
as reported by the Henry Hub for the same time period was $5.49 per Mcf. The
average price of gas for the Henry Hub was $5.16 per Mcf for January through
September. Oil revenues for the three months ended September&nbsp;30, 2004 related
primarily to production for May through July. The average price of oil as
reported by Nymex for that time period was $39.56 per barrel. The average price
of oil was $39.14 per barrel for January&nbsp;2004 through September&nbsp;2004. As of
October&nbsp;22, 2004, the average price of gas for the Henry Hub was $4.90 per Mcf
and the average price of oil reported by Nymex was $49.51 per barrel. It is
difficult to accurately estimate future prices of oil and gas, and any
assumptions concerning future prices may prove to be incorrect.


<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income for the quarter ended September&nbsp;30, 2004 increased
approximately $2,400 compared with the third quarter of 2003. Compared to the
preceding quarter ended June&nbsp;30, 2004, interest income increased approximately
$4,100. Interest income for the nine-month period ended September&nbsp;30, 2004
decreased approximately $7,100 compared to the same time period in 2003. Changes
in interest income are the result of changes in interest rates and funds
available for investment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses for the quarter ended September&nbsp;30,
2004 increased by approximately $12,800 compared to the same quarter of 2003
primarily due to increases in the Trustee and Escrow Agent fees. This increase
was partially offset by decreases due to the timing of expenses for printing and
legal services. Compared to the preceding quarter ended June&nbsp;30, 2004, general
and administrative expenses decreased approximately $111,000. This decrease was
primarily due to the net effect of normal fluctuations in trust expenses.
General and administrative expenses for the nine-month period ended September
30, 2004 decreased approximately $27,300 compared with the nine-month period
ended September&nbsp;30, 2003, due primarily to decreases in expenses for
professional and tax reporting services. These decreases were offset somewhat by
increases in fees for auditing and engineering services.


<P align="left" style="font-size: 10pt">Critical Accounting Policies and Estimates



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trust&#146;s financial statements reflect the selection and application of
accounting policies that require the Trust to make significant estimates and
assumptions. The following are some of the more critical judgement areas in the
application of accounting policies that currently affect the Trust&#146;s financial
condition and results of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis of Accounting


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of the Trust are prepared on the following basis
and are not intended to present financial position and results of operations in
conformity with accounting principles generally accepted in the United States
of America:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalty income, net of severance and ad valorem taxes, and interest
income are recognized in the month in which amounts are received by
the Trust.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trust expenses, consisting principally of routine general and
administrative costs, include payments made during the accounting
period. Expenses are accrued to the extent of amounts that become
payable on the next monthly record date following the end of the
accounting period. Reserves for liabilities that are contingent or
uncertain in amount may also be established if considered necessary.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalties that are producing properties are amortized using the
unit-of-production method. This amortization is shown as a reduction
of Trust corpus.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distributions to Unit holders are recognized when declared by the
Trustee.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of the Trust differ from financial statements
prepared in conformity with accounting principles generally accepted in the
United States of America because of the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Royalty income is recognized in the month received rather than in the
month of production.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expenses other than those expected to be paid on the following
monthly record date are not accrued.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amortization of the Royalties is shown as a reduction to Trust corpus
and not as a charge to operating results.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reserves may be established for contingencies that would not be
recorded under accounting principles generally accepted in the United
States of America.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This comprehensive basis of accounting other than GAAP corresponds to the
accounting permitted for royalty trusts by the U.S. Securities and Exchange
Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue Recognition


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues from royalty interests are recognized in the period in which
amounts are received by the Trust. Royalty income received by the Trust in a
given calendar year will generally reflect the proceeds, on an entitlements
basis, from natural gas produced for the twelve-month period ended September
30th in that calendar year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserve Disclosure


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Independent petroleum engineers estimate the net proved reserves
attributable to the royalty interest. In accordance with Statement of Financial
Standards No.&nbsp;69, &#147;Disclosures About Oil and Gas Producing Activities&#148;,
estimates of future net revenues from proved reserves have been prepared using
year-end contractual gas prices and related costs. Numerous uncertainties are
inherent in estimating volumes and the value of proved reserves and in
projecting future production rates and the timing of development of
non-producing reserves. Such reserve estimates are subject to change as
additional information becomes available. The reserves actually recovered and
the timing of production may be substantially different from the reserve
estimates.

<P align="center" style="font-size: 10pt">13

</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contingencies


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contingencies related to the royalty properties that are unfavorably
resolved would generally be reflected by the Trust as reductions to future
royalty income payments to the Trust with corresponding reductions to cash
distributions to Unit holders. The Trustee is aware of no such items as of
November&nbsp;5, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with the basis of
accounting described above requires management to make estimates and assumptions
that affect reported amounts of certain assets, liabilities, revenues and
expenses as of and for the reporting periods. Actual results may differ from
such estimates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trustee routinely reviews the Trust&#146;s royalty interests in oil and gas
properties for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If an impairment event
occurs and it is determined that the carrying value of the Trust&#146;s royalty
interests may not be recoverable, an impairment will be recognized as measured
by the amount by which the carrying amount of the royalty interests exceeds the
fair value of these assets, which would likely be measured by discounting
projected cash flows.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward Looking Statements


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Report includes &#147;forward-looking statements&#148; within the meaning of
Section&nbsp;21E of the Securities Exchange Act of 1934, which are intended to be
covered by the safe harbor created thereby. All statements other than statements
of historical fact included in this Report are forward-looking statements.
Although the Trustee believes that the expectations reflected in such forward-
looking statements are reasonable, such expectations are subject to numerous
risks and uncertainties and the Trustee can give no assurance that they will
prove correct. There are many factors, none of which is within the Trustee&#146;s
control, that may cause such expectations not to be realized, including, among
other things, factors identified in the Trust&#146;s most recent Annual Report on
Form 10-K affecting oil and gas prices and the recoverability of reserves,
general economic conditions, actions and policies of petroleum-producing nations
and other changes in the domestic and international energy markets.


<P align="center" style="font-size: 10pt">14
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trust has an Internet website and has made available its annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act at http://www.sbr-sabineroyalty.com as soon as reasonably
practicable after such information is electronically filed with or furnished to
the SEC.

<!-- link2 "Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk." -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="left" style="font-size: 10pt"><I>Item&nbsp;3. Quantitative
and Qualitative Disclosures About Market Risk.</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Trust invests in no derivative financial instruments, and has no
foreign operations or long-term debt instruments. Other than the Trust&#146;s ability
to periodically borrow money as necessary to pay expenses, liabilities and
obligations of the Trust that cannot be paid out of cash held by the Trust, the
Trust is prohibited from engaging in borrowing transactions. The amount of any
such borrowings is unlikely to be material to the Trust. The Trust periodically
holds short term investments acquired with funds held by the Trust pending
distribution to Unitholders and funds held in reserve for the payment of Trust
expenses and liabilities. Because of the short-term nature of these borrowings
and investments and certain limitations upon the types of such investments which
may be held by the Trust, the Trustee believes that the Trust is not subject to
any material interest rate risk. The Trust does not engage in transactions in
foreign currencies which could expose the Trust or Unitholders to any foreign
currency related market risk.

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<DIV align="left"><A NAME="004"></A></DIV>

<P align="left" style="font-size: 10pt"><I>Item&nbsp;4. Controls and
Procedures.</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the end of the period covered by this report, the Trustee carried
out an evaluation of the effectiveness of the design and operation of the
Trust&#146;s disclosure controls and procedures pursuant to Exchange Act Rules&nbsp;13a-15
and 15d-15. Based upon that evaluation, the Trustee concluded that the Trust&#146;s
disclosure controls and procedures are effective in timely alerting the Trustee
to material information relating to the Trust required to be included in the
Trust&#146;s periodic filings with the Securities and Exchange Commission. There has
not been any change in the Trust&#146;s internal control over financial reporting
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Trust&#146;s internal control over
financial reporting.

<!-- link1 "PART II &#151; OTHER INFORMATION" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center" style="font-size: 10pt">PART II &#151; OTHER INFORMATION



<P align="left" style="font-size: 10pt"><I>Items 1-5 not
applicable.</I>

<!-- link2 "Item&nbsp;6. Exhibits." -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="left" style="font-size: 10pt"><I>Item&nbsp;6. Exhibits.</I>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;Number</DIV></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">and Description</DIV></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(31) Trustee Certification pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(32) Trustee Certification pursuant to 18 U.S.C. Section&nbsp;1350, as
adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</DIV></TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">SABINE ROYALTY TRUST<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2">Bank of America, N.A.<br>Trustee<br>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Ron E. Hooper
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Ron E. Hooper&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Senior Vice President and
Trust Administrator&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="left" style="font-size: 10pt">Date: November 8, 2004



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(The Trust has no directors or executive officers.)


<P align="center" style="font-size: 10pt">16
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<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>d19339exv31.htm
<DESCRIPTION>TRUSTEE CERTIFICATION PURSUANT TO SECTION 302
<TEXT>
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<TITLE>exv31</TITLE>
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<P align="right" style="font-size: 10pt"><B>EXHIBIT 31</B>



<P align="center" style="font-size: 10pt"><B>CERTIFICATIONS</B>


<P align="left" style="font-size: 10pt">I, Ron Hooper, certify that:

<P align="left" style="font-size: 10pt">1. I have reviewed this quarterly report on Form 10-Q of Sabine Royalty Trust,
for which Bank of America, N.A. acts as Trustee;

<P align="left" style="font-size: 10pt">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;

<P align="left" style="font-size: 10pt">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 of the registrant as of, and for, the periods presented in this quarterly
report;

<P align="left" style="font-size: 10pt">4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)), or for
causing such controls and procedures to be established and maintained, for the
registrant and I have:


<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
my supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to me by others within those entities, particularly
during the period in which this quarterly report is being
prepared;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures and presented in this quarterly report
my conclusions about the effectiveness of the disclosure
controls and procedures as of the end of the period covered by
this quarterly report based on such evaluation; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disclosed in this quarterly report any changes in the
registrant&#146;s internal control over financial reporting that
occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control
over financial reporting; and</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant&#146;s auditors:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant&#146;s ability to record, process, summarize and report
financial information; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any fraud, whether or not material, that involves persons who
have a significant role in the registrant&#146;s internal control
over financial reporting.</TD>
</TR>

</TABLE>
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date: November 8, 2004</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Ron Hooper
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Ron Hooper&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Senior Vice President and
Trust Administrator
Bank of America, N.A.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>d19339exv32.htm
<DESCRIPTION>TRUSTEE CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
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<P align="right" style="font-size: 10pt"><B>EXHIBIT 32</B>



<P align="center" style="font-size: 10pt"><B>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT<BR>
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>


<P align="left" style="font-size: 10pt">In connection with the Quarterly Report of Sabine Royalty Trust (the &#147;Trust&#148;) on
Form 10-Q for the quarterly period ended September&nbsp;30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the &#147;Report&#148;), the
undersigned, not in its individual capacity but solely as the trustee of the
Trust, certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002, that to its knowledge:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Trust.

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">BANK OF AMERICA, N.A., TRUSTEE FOR<BR>
SABINE ROYALTY TRUST<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Ron E. Hooper
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Ron E. Hooper,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Senior Vice President, Royalty Management&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="left" style="font-size: 10pt">Date: November 8, 2004

<P align="left" style="font-size: 10pt">A signed original of this written statement required by Section&nbsp;906 has been
provided to Sabine Royalty Trust and will be retained by Sabine Royalty Trust
and furnished to the Securities and Exchange Commission or its staff upon
request.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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