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<SEC-DOCUMENT>0000930661-01-000866.txt : 20010402
<SEC-HEADER>0000930661-01-000866.hdr.sgml : 20010402
ACCESSION NUMBER:		0000930661-01-000866
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010330

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CROSS TIMBERS ROYALTY TRUST
		CENTRAL INDEX KEY:			0000881787
		STANDARD INDUSTRIAL CLASSIFICATION:	OIL ROYALTY TRADERS [6792]
		IRS NUMBER:				756415930
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		
		SEC FILE NUMBER:	001-10982
		FILM NUMBER:		1587620

	BUSINESS ADDRESS:	
		STREET 1:		500 WEST SEVENTH ST STE 1300
		STREET 2:		P O BOX 1317
		CITY:			FORT WORTH
		STATE:			TX
		ZIP:			76101-1317
		BUSINESS PHONE:		8173906592

	MAIL ADDRESS:	
		STREET 2:		P O BOX 1317
		CITY:			FORT WORTH
		STATE:			TX
		ZIP:			76101-1317
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>

<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ----------------

                                   FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,           Commission file number 1-10982
2000

                          Cross Timbers Royalty Trust
   (Exact name of registrant as specified in the Cross Timbers Royalty Trust
                                  Indenture)

                Texas                                    75-6415930
   (State or other jurisdiction of             (I.R.S. Employer Identification
   incorporation or organization)                           No.)

        Bank of America, N.A.                              75283-0650
               Trustee                                     (Zip Code)
           P.O. Box 830650
            Dallas, Texas
   (Address of principal executive
              offices)

       Registrant's telephone number including area code: (877) 228-5084

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
            Title of each class             Name of each exchange on which registered
            -------------------             -----------------------------------------
  <S>                                       <C>
        Units of Beneficial Interest                 New York Stock Exchange
</TABLE>

       Securities registered pursuant to Section 12(g) of the Act: None

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes   X  No

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

  At March 1, 2001, there were 6,000,000 units of beneficial interest of the
trust outstanding. The aggregate market value of the units (based on the
closing price on the New York Stock Exchange on March 1, 2001) held by non-
affiliates of the registrant on that date was approximately $77.3 million.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Listed below is the only document parts of which are incorporated herein by
reference and the parts of this report into which the document is
incorporated:

                  2000 Annual Report to Unitholders--Part II

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

                                    PART I

Item 1. Business

  Cross Timbers Royalty Trust is an express trust created under the laws of
Texas pursuant to the Cross Timbers Royalty Trust Indenture entered into on
February 12, 1991 between predecessors of Cross Timbers Oil Company, as
grantors, and NCNB Texas National Bank, as trustee. Bank of America, N.A.,
successor of NCNB Texas National Bank, is now the trustee of the trust. The
principal office of the trust is located at 901 Main Street, Dallas, Texas
75202 (telephone number 877-228-5084).

  On February 12, 1991, the predecessors of Cross Timbers Oil conveyed defined
net profits interests to the trust under five separate conveyances:

  -- one in each of the states of Texas, Oklahoma and New Mexico, to convey a
     90% defined net profits interest carved out of substantially all royalty
     and overriding royalty interests owned by the predecessors in those
     states, and

  -- one in each of the states of Texas and Oklahoma, to convey a 75% defined
     net profits interest carved out of specific working interests owned by
     the predecessors in those states.

  The conveyance of these net profits interests was effective for production
from October 1, 1990. The net profits interests and the underlying properties
are further described under Item 2.

  In exchange for the conveyance of the net profits interests to the trust,
the predecessors of Cross Timbers Oil received 6,000,000 units of beneficial
interest of the trust. Predecessors of Cross Timbers Oil distributed units to
their owners in February 1991 and November 1992, and in February 1992, sold
units in the trusts initial public offering. Units are listed and traded on
the New York Stock Exchange under the symbol "CRT." During 1996 and 1997,
Cross Timbers Oil's Board of Directors authorized Cross Timbers Oil to
purchase two million units. As of March 1, 2001, Cross Timbers Oil owned
1,360,000 units, or 22.7%, of the outstanding units.

  In June 1998 the trust and Cross Timbers Oil filed a registration statement
with the Securities and Exchange Commission to sell the 1,360,000 units held
by Cross Timbers Oil. As Cross Timbers Oil stated in a related news release,
the filing was made in anticipation of better commodity prices and any sale is
dependent on an improved market for oil and gas equities. The registration
statement was amended in October 2000. The trust did not participate in Cross
Timbers Oil's decisions to acquire or sell units and will not receive any of
the proceeds in the event of such sale.

  Under the terms of each of the five conveyances, the trust receives royalty
income from the net profits interests on the last business day of each month.
Royalty income is determined by Cross Timbers Oil by multiplying the net
profit percentage (90% or 75%) times net proceeds from the underlying
properties for each of the five conveyances during the previous month. Net
proceeds are the gross proceeds received from the sale of production, less
production costs. For the 90% net profits interests and the 75% net profits
interests, "production costs" generally include applicable property taxes,
transportation, marketing and other charges. For the 75% net profits interests
only, production costs also include capital and operating costs paid (e.g.,
drilling, production and other direct costs of owning and operating the
property) and a monthly overhead charge that is adjusted annually. The monthly
overhead charge at December 31, 2000 was $22,570. If production costs exceed
gross proceeds for any conveyance, such excess is carried forward to the
computation of net proceeds for future months until the excess costs (plus
interest accrued as specified in the conveyances) are completely recovered.
Such excess production costs and related accrued interest from one conveyance
cannot be used to reduce net proceeds from any other conveyance.

  The trust is not liable for any production costs or liabilities attributable
to the net profits interests. If at any time the trust receives royalty income
in excess of the amount due, the trust is not obligated to return such
overpayment, but royalty income payable to the trust for the next month will
be reduced by the overpayment, plus interest at the prime rate.

                                       1
<PAGE>

  Cross Timbers Oil does not operate or control any of the underlying
properties. However, Cross Timbers Oil operates working interests from which
approximately 20 overriding royalty interests in the San Juan Basin were
conveyed. Cross Timbers Oil acquired these working interests in December 1997
and became operator. As a working interest owner, Cross Timbers Oil can
generally decline participation in any operation and allow consenting parties
to conduct such operations, as provided under the operating agreements. Cross
Timbers Oil also can assign, sell, or otherwise transfer its interest in the
underlying properties, subject to the net profits interests, or can abandon an
underlying property that is a working interest if it is incapable of producing
in paying quantities, as determined by Cross Timbers Oil.

  To the extent it has the right to do so, Cross Timbers Oil is responsible
for marketing its production from the underlying properties under existing
sales contracts or new arrangements on the best terms reasonably obtainable in
the circumstances.

  Royalty income received by the trust on or before the last business day of
the month generally represents receipts attributable to oil production two
months prior and gas production three months prior. The monthly distribution
amount to unitholders is determined by:

  Adding--

  (1) royalty income received,

  (2)  estimated interest income to be received on the monthly distribution
       amount, including an adjustment for the difference between the
       estimated and actual interest received for the prior monthly
       distribution amount,

  (3)  cash available as a result of reduction of cash reserves, and

  (4)  any other cash receipts, and

  Subtracting the sum of--

  (1) liabilities paid and

  (2)  the reduction in cash available due to establishment of or increase in
       any cash reserve.

  The monthly distribution amount is distributed to unitholders of record
within ten business days after the monthly record date. The monthly record
date is generally the last business day of the month. The trustee calculates
the monthly distribution amount and announces the distribution per unit at
least ten days prior to the monthly record date.

  The trustee may establish cash reserves for contingencies. Cash held for
such reserves, as well as for pending payment of the monthly distribution
amount may be invested in federal obligations or certificates of deposit of
major banks.

  The trustee's function is to collect the royalty income from the net profits
interests, to pay all trust expenses and pay the monthly distribution amount
to unitholders. The trustee's powers are specified by the terms of the
indenture. The trust cannot engage in any business activity or acquire any
assets other than the net profits interests and specific short-term cash
investments. The trust has no employees since all administrative functions are
performed by the trustee.

  Approximately 64% of the royalty income received by the trust during 2000,
as well as 86% of the estimated proved reserves of the net profits interests
at December 31, 2000 (based on estimated future net revenues using year-end
oil and gas prices), is attributable to natural gas. There has historically
been a greater demand for gas during the winter months than the rest of the
year. Otherwise, trust income is not subject to seasonal factors, nor
dependent upon patents, licenses, franchises or concessions. The trust
conducts no research activities.

                                       2
<PAGE>

Item 2. Properties

  The net profits interests are the principal asset of the trust. The trustee
cannot acquire any other asset, with the exception of certain short-term
investments as specified under Item 1. The trustee is prohibited from selling
any portion of the net profits interests unless approved by at least 80% of
the unitholders or at such time as the trust's gross revenue is less than
$1,000,000 for two successive years.

  The net profits interests are composed of:

  --the 90% net profits interests which are carved from:

  a)  producing royalty and overriding royalty interest properties in Texas,
      Oklahoma and New Mexico, and

  b)  11.11% non-participating royalty interests in nonproducing properties
      located primarily in Texas and Oklahoma;

  --the 75% net profits interests which are carved from nonoperated working
   interests in four properties in Texas and three properties in Oklahoma.

  All underlying royalties, underlying nonproducing royalties and underlying
working interest properties are currently owned by Cross Timbers Oil. Cross
Timbers Oil may sell all or any portion of the underlying properties at any
time, subject to and burdened by the net profits interests.

Producing Acreage, Wells and Drilling

  Underlying Royalties. The underlying royalties are royalty and overriding
royalty interests primarily located in mature producing oil and gas fields.
The most significant producing region in which the underlying royalties are
located is the San Juan Basin in northwestern New Mexico. The trust's
estimated proved reserves from this region totaled 28.3 Bcf at December 31,
2000, or approximately 81% of the trust's total gas reserves at that date.
Cross Timbers Oil estimates that underlying royalties in the San Juan Basin
include more than 2,000 gross (approximately 30 net) wells, covering over
60,000 gross acres. Most of these wells are operated by Amoco Production
Company or Burlington Resources Oil & Gas Company. Production from
conventional gas wells is primarily from the Dakota, Mesa Verde and Pictured
Cliffs formations.

  Approximately 28% of the trust's 2000 gas sales volumes were from coal seam
production in the San Juan Basin. Through the year 2002, sales of certain coal
seam gas qualify for a federal income tax credit. See "Regulation--Coal Seam
Tax Credit."

  Most of the trust's San Juan Basin conventional, or non-coal seam,
production is from the Mesa Verde formation, which has been approved for
increased density drilling. Cross Timbers Oil believes that operators will
further develop the Mesa Verde formation underlying the net profits interests,
and such future development could significantly impact underlying gas sales
volumes. However, minimal drilling is expected in 2001 because of
environmental concerns delaying the approval of drilling permits.

  During 1996, additional eastward pipeline capacity was completed in the San
Juan Basin, reducing the dependence of San Juan Basin gas on California
markets and effectively increasing San Juan Basin gas prices in relation to
prices from other regions. Gas-powered electricity generation continues to
increase in the southwest U.S., thereby increasing demand for San Juan Basin
gas. Additional eastward pipeline capacity for western Canadian gas supplies,
which previously were primarily directed to U.S. West Coast markets, has also
improved the market for San Juan Basin gas.

  The underlying royalties also include royalties in the Sand Hills field of
Crane County, Texas. Most of these properties are operated by Exxon Company,
U.S.A. or Chevron, U.S.A. The Sand Hills field was discovered in 1931 and
includes production from three main intervals, the Tubb, McKnight and Judkins.
Development potential for the field includes recompletions and additional
infill drilling.

  The underlying royalties contain approximately 462,000 gross (approximately
26,000 net) producing acres. Well counts for the underlying royalties cannot
be provided because information regarding the number of wells on royalty
properties is generally not made available to royalty interest owners.

                                       3
<PAGE>

  Underlying Working Interest Properties. The underlying working interest
properties, detailed below, are developed properties undergoing secondary or
tertiary recovery operations:

<TABLE>
<CAPTION>
                                                                                      Ownership of
                                                                                    Cross Timbers Oil
                                                                                    -----------------
                                                                                    Working  Revenue
         Unit             County/State                    Operator                  Interest Interest
         ----            ---------------                  --------                  -------- --------
<S>                      <C>             <C>                                        <C>      <C>
North Cowden             Ector/Texas     Occidental Permian, Ltd.                      1.7%    1.4%
North Central Levelland  Hockley/Texas   Mobil Producing Texas and New Mexico, Inc.    3.2%    2.1%
Penwell                  Ector/Texas     Texaco Exploration and Production, Inc.       5.2%    4.6%
Sharon Ridge Canyon      Borden/Texas    Exxon Company, U.S.A.                         4.3%    2.8%
Hewitt                   Carter/Oklahoma Exxon Company, U.S.A.                        11.3%    9.9%
Wildcat Jim Penn         Carter/Oklahoma LeNorman Partners, L.L.C.                     8.6%    7.5%
South Graham Deese       Carter/Oklahoma Maynard Oil Company                           8.2%    7.0%
</TABLE>

  The underlying working interest properties consist of 60,154 gross (2,290
net) producing acres. As of December 31, 2000, there were 1,494 gross (68.3
net) productive oil wells, 1,002 gross (42.9 net) injection wells and no wells
in process of drilling on these properties. During 2000, 12 gross (0.2 net)
wells were drilled and during 1999, 8 gross (0.1 net) producing wells were
drilled. No wells were drilled during 1998.

Oil and Gas Production

  Trust production is recognized in the period royalty income is received,
which is the month following receipt by Cross Timbers Oil, and generally two
months after the time of oil production and three months after gas production.
Oil and gas production and average sales prices attributable to the underlying
properties and the net profits interests for the three years ended December
31, 2000 were as follows:

<TABLE>
<CAPTION>
                             90% Net Profits Interests     75% Net Profits Interests               Total
                          -------------------------------- -------------------------- --------------------------------
                             2000       1999       1998      2000     1999     1998      2000       1999       1998
                          ---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
<S>                       <C>        <C>        <C>        <C>      <C>      <C>      <C>        <C>        <C>
Production
Underlying Properties
 Oil--Sales (Bbls)......      86,970     92,650    100,592  257,153  255,959  291,777    344,123    348,609    392,369
 Average per day
  (Bbls)................         238        254        276      702      701      799        940        955      1,075
 Gas--Sales (Mcf).......   2,964,687  3,548,594  3,398,203  115,914   94,429  103,890  3,080,601  3,643,023  3,502,093
 Average per day (Mcf)..       8,100      9,722      9,310      317      259      285      8,417      9,981      9,595
Net profits interests
 Oil--Sales (Bbls)......      76,959     77,783     83,856   86,260   19,894   20,918    163,219     97,677    104,774
 Average per day
  (Bbls)................         210        213        230      236       55       57        446        268        287
 Gas--Sales (Mcf).......   2,659,139  3,152,693  3,010,809   30,120   10,249    7,857  2,689,259  3,162,942  3,018,666
 Average per day (Mcf)..       7,266      8,638      8,249       82       28       21      7,348      8,666      8,270
Average Sales Price
 Oil (per Bbl)..........  $    26.41 $    14.54 $    14.04 $  27.85 $  15.01 $  13.18 $    27.49 $    14.88 $    13.40
 Gas (per Mcf)..........  $     3.36 $     2.01 $     2.05 $   2.28 $   1.35 $   1.34 $     3.32 $     1.99 $     2.03
</TABLE>

Nonproducing Acreage

  The underlying nonproducing royalties contain approximately 200,000 gross
(approximately 3,000 net) acres in Texas, Oklahoma and New Mexico which were
nonproducing at the date of the trust's creation. Cross Timbers Oil is the
owner of underlying mineral interests in the majority of this acreage. The
trust is entitled to 10% of oil and gas production attributable to the
underlying mineral properties, but is not entitled to delay rental payments or
lease bonuses. There has been no significant development of such nonproducing
acreage since the trust's creation.

                                       4
<PAGE>

Pricing and Sales Information

  Oil and gas are generally sold from the underlying properties at market-
sensitive prices. The majority of sales from the underlying working interest
properties are to major oil and gas companies. Information about purchasers of
oil and gas from royalty properties is generally not provided by operators to
Cross Timbers Oil as a royalty owner, or to the trust.

Oil and Natural Gas Reserves

  General

  The following are definitions adopted by the Securities and Exchange
Commission and the Financial Accounting Standards Board which are applicable
to terms used in the following discussion of oil and gas reserves:

    Proved reserves--Estimated quantities of crude oil, natural gas and
  natural gas liquids which, upon analysis of geologic and engineering data,
  appear with reasonable certainty to be recoverable in the future from known
  oil and gas reservoirs under existing economic and operating conditions.

    Proved developed reserves--Proved reserves which can be expected to be
  recovered through existing wells with existing equipment and operating
  methods.

    Proved undeveloped reserves--Proved reserves which are expected to be
  recovered from new wells on undrilled acreage, or from existing wells where
  a relatively major expenditure is required.

    Estimated future net revenues--Also referred to herein as "estimated
  future net cash flows." Computational result of applying current prices of
  oil and gas (with consideration of price changes only to the extent
  provided by existing contractual arrangements) to estimated future
  production from proved oil and gas reserves as of the date of the latest
  balance sheet presented, less estimated future expenditures (based on
  current costs) to be incurred in developing and producing the proved
  reserves. Estimated future net revenues do not include the effects of the
  coal seam tax credit, since the trust is not a taxable entity and the
  credit inures directly to the benefit of the unitholder (see "Discounted
  Present Value of the Coal Seam Tax Credit" below).

    Present value of estimated future net revenues--Also referred to herein
  as "standardized measure of discounted future net cash flows" or
  "standardized measure." Computational result of discounting estimated
  future net revenues at a rate of 10% annually.

  Miller and Lents, Ltd., independent petroleum engineers, has estimated oil
and gas reserves attributable to the underlying properties and net profits
interests as of December 31, 2000, 1999, 1998 and 1997. Numerous uncertainties
are inherent in estimating reserve volumes and values, and such estimates are
subject to change as additional information becomes available. The reserves
actually recovered and the timing of production of these reserves may be
substantially different from the original estimates.

  Reserve quantities and revenues for the net profits interests were estimated
from projections of reserves and revenues attributable to the combined
interests of the trust and Cross Timbers Oil in the subject properties. Since
the trust has defined net profits interests, the trust does not own a specific
percentage of the oil and gas reserve quantities. Accordingly, reserves
allocated to the trust pertaining to its 75% net profits interest in the
working interest properties have effectively been reduced to reflect recovery
of the trust's 75% portion of applicable production and development costs.
Because trust reserve quantities are determined using an allocation formula,
any fluctuations in actual or assumed prices or costs will result in revisions
to the estimated reserve quantities allocated to the net profits interests.

  The standardized measure of discounted future net cash flows and changes in
such discounted cash flows as presented below are prepared using assumptions
required by the Financial Accounting Standards Board. Such assumptions include
the use of year-end prices for oil and gas and year-end costs for estimated
future

                                       5
<PAGE>

4-6 development and production expenditures to produce the proved reserves.
Because natural gas prices are influenced by seasonal demand, use of year-end
prices, as required by the Financial Accounting Standards Board, may not be
the most representative in estimating future revenues or reserve data. Future
net cash flows are discounted at an annual rate of 10%. No provision is
included for federal income taxes since future net revenues are not subject to
taxation at the trust level.

  Year-end oil prices used to determine the standardized measure were based on
a West Texas Intermediate crude oil posted price of $23.75 per Bbl in 2000,
$22.75 per Bbl in 1999, $9.50 per Bbl in 1998 and $15.50 per Bbl in 1997. The
year-end weighted average realized gas prices used to determine the
standardized measure were $9.48 per Mcf in 2000, $2.19 per Mcf in 1999, $1.88
per Mcf in 1998 and $1.76 per Mcf in 1997.

  Proved Reserves

  The following table reconciles the change in proved reserves attributable to
the net profits interests and underlying properties from December 31, 1997
through December 31, 2000:

<TABLE>
<CAPTION>
                                      Net Profits Interests
                         ----------------------------------------------------
                                              75% Net
                         90% Net Profits      Profits                             Underlying
                            Interests        Interests           Total            Properties
                         ----------------  ---------------  -----------------  ------------------
(in thousands)            Oil      Gas       Oil     Gas      Oil      Gas       Oil       Gas
                         (Bbls)    (Mcf)    (Bbls)   (Mcf)   (Bbls)    (Mcf)    (Bbls)     (Mcf)
                         ------  --------  -------  ------  -------  --------  --------  --------
<S>                      <C>     <C>       <C>      <C>     <C>      <C>       <C>       <C>
Balance, December 31,
 1997................... 731.5   37,886.2    964.7   355.6  1,696.2  38,241.8   4,418.3  44,075.4
 Extensions, discoveries
  and other additions...   3.6       95.7      -0-     -0-      3.6      95.7       4.1     265.6
 Revisions of prior
  estimates.............  25.3    1,482.1   (696.7) (282.4)  (671.4)  1,199.7  (1,620.1)    894.5
 Production............. (83.9)  (3,010.8)   (20.9)   (7.9)  (104.8) (3,018.7)   (392.4) (3,502.1)
                         -----   --------  -------  ------  -------  --------  --------  --------
Balance, December 31,
 1998................... 676.5   36,453.2    247.1    65.3    923.6  36,518.5   2,409.9  41,733.4
 Extensions, discoveries
  and other additions...  10.5      162.2      -0-     -0-     10.5     162.2      13.1     186.0
 Revisions of prior
  estimates............. 109.9    1,462.1  1,251.8   533.4  1,361.7   1,995.5   2,385.7   2,322.0
 Production............. (77.8)  (3,152.7)   (19.9)  (10.2)   (97.7) (3,162.9)   (348.6) (3,643.0)
                         -----   --------  -------  ------  -------  --------  --------  --------
Balance, December 31,
 1999................... 719.1   34,924.8  1,479.0   588.5  2,198.1  35,513.3   4,460.1  40,598.4
 Extensions, discoveries
  and other additions...   3.2       77.1      -0-     -0-      3.2      77.1       3.5      85.7
 Revisions of prior
  estimates.............  32.7    1,864.4     33.2    14.0     65.9   1,878.4     123.5   1,773.5
 Production............. (77.0)  (2,659.1)   (86.2)  (30.1)  (163.2) (2,689.2)   (344.1) (3,080.6)
                         -----   --------  -------  ------  -------  --------  --------  --------
Balance, December 31,
 2000................... 678.0   34,207.2  1,426.0   572.4  2,104.0  34,779.6   4,243.0  39,377.0
                         =====   ========  =======  ======  =======  ========  ========  ========
</TABLE>

  During 2000, 1999 and 1998, upward revisions of prior estimates of the 90%
net profits interests' proved gas reserves were primarily because of lower
than anticipated production declines. Revisions of prior estimates of the 75%
net profits interests' proved reserves and the underlying properties' proved
oil reserves in each of these years were primarily the result of changes in
the year-end oil prices used in estimating proved reserves. See "General"
above.

                                       6
<PAGE>

  Proved Developed Reserves

  The following are estimated quantities of proved developed oil and gas
reserves attributable to the net profits interests and underlying properties
as of December 31, 1997 and each following year-end through December 31, 2000:

<TABLE>
<CAPTION>
                                     Net Profits Interests
                         ----------------------------------------------
                                            75% Net
                         90% Net Profits    Profits                        Underlying
                            Interests      Interests        Total          Properties
                         --------------- ------------- ---------------- ----------------
                          Oil     Gas      Oil    Gas    Oil     Gas      Oil     Gas
                         (Bbls)  (Mcf)   (Bbls)  (Mcf) (Bbls)   (Mcf)   (Bbls)   (Mcf)
(in thousands)           ------ -------- ------- ----- ------- -------- ------- --------
<S>                      <C>    <C>      <C>     <C>   <C>     <C>      <C>     <C>
December 31, 1997....... 727.9  35,947.4   908.6 346.8 1,636.5 36,294.2 4,231.6 43,576.1
                         =====  ======== ======= ===== ======= ======== ======= ========
December 31, 1998....... 672.8  34,514.0   206.4  60.7   879.2 34,574.7 2,195.1 39,520.1
                         =====  ======== ======= ===== ======= ======== ======= ========
December 31, 1999....... 715.7  33,036.5 1,375.0 570.3 2,090.7 33,606.8 4,245.6 38,463.3
                         =====  ======== ======= ===== ======= ======== ======= ========
December 31, 2000....... 675.0  32,371.1 1,317.8 553.5 1,992.8 32,924.6 4,028.8 37,300.0
                         =====  ======== ======= ===== ======= ======== ======= ========
</TABLE>

  Standardized Measure of Discounted Future Net Cash Flows from Proved
Reserves

  The following are summary calculations of the standardized measure of
discounted future net cash flows for the net profits interests and underlying
properties as of December 31, 2000, 1999 and 1998:


<TABLE>
<CAPTION>
                          90% Net Profits Interests     75% Net Profits Interests               Total
                         -----------------------------  ---------------------------  ------------------------------
                                December 31,                  December 31,                   December 31,
                         -----------------------------  ---------------------------  ------------------------------
                           2000       1999      1998      2000      1999     1998      2000       1999       1998
(in thousands)           ---------  --------  --------  --------  --------  -------  ---------  ---------  --------


  Net Profits Interests

<S>                      <C>        <C>       <C>       <C>       <C>       <C>      <C>        <C>        <C>
Future cash inflows..... $ 347,874  $ 97,902  $ 77,207  $ 40,146  $ 36,670  $ 2,582  $ 388,020  $ 134,572  $ 79,789
Future production
 taxes..................   (28,042)   (7,751)   (5,401)   (2,786)   (2,487)    (131)   (30,828)   (10,238)   (5,532)
                         ---------  --------  --------  --------  --------  -------  ---------  ---------  --------
Future net cash flows...   319,832    90,151    71,806    37,360    34,183    2,451    357,192    124,334    74,257
10% discount factor.....  (169,073)  (46,573)  (37,222)  (18,692)  (17,135)  (1,259)  (187,765)   (63,708)  (38,481)
                         ---------  --------  --------  --------  --------  -------  ---------  ---------  --------
Standardized measure.... $ 150,759  $ 43,578  $ 34,584  $ 18,668  $ 17,048  $ 1,192  $ 169,427  $  60,626  $ 35,776
                         =========  ========  ========  ========  ========  =======  =========  =========  ========

  Underlying Properties

Future cash inflows...........................................................       $ 484,675  $ 200,075  $104,659
Future costs:
 Production...................................................................         (78,973)   (52,858)  (20,265)
 Development..................................................................            (520)      (517)     (519)
                                                                                     ---------  ---------  --------
Future net cash flows.........................................................         405,182    146,700    83,875
10% discount factor...........................................................        (212,781)   (74,879)  (43,282)
                                                                                     ---------  ---------  --------
Standardized measure..........................................................       $ 192,401  $  71,821  $ 40,593
                                                                                     =========  =========  ========
</TABLE>


                                       7
<PAGE>

  Changes in Standardized Measure of Discounted Future Net Cash Flows from
Proved Reserves

  The following reconciles the changes during 2000, 1999 and 1998 in the
standardized measure for the net profits interests. Revisions in each of the
years were primarily related to changes in year-end oil and gas prices.

<TABLE>
<CAPTION>
                             90% Net Profits            75% Net Profits
                                Interests                  Interests                    Total
                         --------------------------  ------------------------  --------------------------
                           2000     1999     1998     2000     1999     1998     2000     1999     1998
                         --------  -------  -------  -------  -------  ------  --------  -------  -------
(in thousands)
<S>                      <C>       <C>      <C>      <C>      <C>      <C>     <C>       <C>      <C>
Standardized measure,
 January 1.............. $ 43,578  $34,584  $35,650  $17,048  $ 1,192  $7,846  $ 60,626  $35,776  $43,496
 Extensions, discoveries
  and other additions...      461      384      155      -0-      -0-     -0-       461      384      155
 Accretion of discount..    3,683    3,078    3,176    1,476      106     698     5,159    3,184    3,874
 Revisions of prior
  estimates, changes in
  price and other.......  112,338   11,864    2,369    2,504   16,109  (7,038)  114,842   27,973   (4,669)
 Royalty income.........   (9,301)  (6,332)  (6,766)  (2,360)    (359)   (314)  (11,661)  (6,691)  (7,080)
                         --------  -------  -------  -------  -------  ------  --------  -------  -------
Standardized measure,
 December 31............ $150,759  $43,578  $34,584  $18,668  $17,048  $1,192  $169,427  $60,626  $35,776
                         ========  =======  =======  =======  =======  ======  ========  =======  =======
</TABLE>

  Discounted Present Value of the Coal Seam Tax Credit

  The standardized measure above does not include the effects of the coal seam
tax credit since the trust is not a taxable entity. The following table
summarizes the estimated coal seam tax credit attributable to the 90% net
profits interests at December 31, 2000, 1999 and 1998. Such estimates are
based on projected coal seam gas production through the year 2002 (after which
date the tax credit will no longer be available) as estimated by independent
engineers. The estimates are also based on the current year estimated Btu
content and the coal seam tax credit of $1.06 per MMBtu at December 31, 2000,
$1.02 per MMBtu at December 31, 1999 and $1.05 per MMBtu at December 31, 1998.
"See Regulation--Coal Seam Tax Credit."

<TABLE>
<CAPTION>
                                                               December 31,
                                                           --------------------
                                                            2000   1999   1998
                                                           ------ ------ ------
   (in thousands)
   <S>                                                     <C>    <C>    <C>
   Undiscounted........................................... $1,225 $1,979 $2,780
                                                           ====== ====== ======
   Discounted present value at 10%........................ $1,120 $1,740 $2,359
                                                           ====== ====== ======
</TABLE>

Certain Provisions Affecting San Juan Basin Royalty Interests

  Certain instruments creating or governing some of the underlying properties
that are royalties and overriding royalties in the San Juan Basin contain
provisions that purportedly either reduce the overriding royalty interest or
convert the royalty or overriding royalty interest into a working interest
when gas production falls below specified levels. Cross Timbers Oil believes
these provisions were included in these instruments because of a federal
regulation that has since been repealed which limited the amount of royalties
and overriding royalties placed on federal leases in the San Juan Basin. No
assurances, however, can be made regarding the effect of these provisions on
the trust. Cross Timbers Oil and other royalty interest owners filed a
lawsuit, later joined by the trust in 1993, to recover revenues suspended by
working interest owners based on their interpretation of these reduction or
conversion provisions. The trust, Cross Timbers Oil and the other royalty
owners settled this lawsuit in 1996, receiving past production due to the
trust and receiving further compensation for an agreement to reduce the trusts
interest in the involved properties.

Reversion Agreement

  Certain of the underlying royalties are subject to a reversion agreement
between Cross Timbers Oil and a third party. The agreement calls for Cross
Timbers Oil to transfer 25% of its interest in those properties to the third
party when amounts received by Cross Timbers Oil from the underlying
properties subject to the agreement equal the purchase price of the properties
plus a 1% per month return on the unrecouped purchase price, known

                                       8
<PAGE>

as payout. If payout were to occur and the 25% interest were to be transferred
to the third party, the amounts payable to the trust would be proportionately
reduced. Based on 2000 prices and levels of production, Cross Timbers Oil has
advised the trustee that payout is not projected to occur for more than 13
years. Unless higher prices and production are sustained for several years,
this reversion agreement is not expected to have a material impact on the
trust.

Regulation

  Natural Gas Regulation

  The interstate transportation and sale for resale of natural gas is subject
to federal regulation, including transportation rates charged and various
other matters, by the Federal Energy Regulatory Commission (FERC). Federal
price controls on wellhead sales of domestic natural gas terminated on January
1, 1993. While natural gas prices are currently unregulated, Congress
historically has been active in the area of natural gas regulation. It is
impossible to predict whether new legislation to regulate natural gas might be
proposed, what proposals, if any, might actually be enacted by Congress or the
various state legislatures, and what effect, if any, such proposals might have
on the operations of the underlying properties.

  State Regulation

  The various states regulate the production and sale of oil and natural gas,
including imposing requirements for obtaining drilling permits, the method of
developing new fields, the spacing and operation of wells and the prevention
of waste of oil and gas resources. The rates of production may be regulated
and the maximum daily production allowables from both oil and gas wells may be
established on a market demand or conservation basis, or both.

  Coal Seam Tax Credit

  The trust receives royalty income from coal seam gas wells. Under Section 29
of the Internal Revenue Code, coal seam gas produced through the year 2002
from wells drilled after December 31, 1979 and prior to January 1, 1993
qualifies for the federal income tax credit for producing nonconventional
fuels. This tax credit for 2000 was approximately $1.06 per MMBtu. Such
credit, calculated based on the unitholders pro rata share of qualifying
production, may not reduce the unitholder's regular tax liability (after the
foreign tax credit and certain other nonrefundable credits) below his
tentative minimum tax. Any part of the Section 29 credit not allowed for the
tax year solely because of this limitation is subject to certain carryover
provisions.

  In 1999, a U.S. Court of Appeals held that a well drilled and completed in
an otherwise qualifying formation prior to January 1, 1993 is not eligible for
the Section 29 credit unless the producer received an appropriate well
category determination from the FERC. The decision indicated that lack of a
well category determination may render the Section 29 credit unavailable with
respect to production from wells recompleted in a qualified formation after
January 1, 1993, the date that the FERCs authority to render category
determinations ended. Effective September 2000, the FERC amended its
regulations to reinstate certain regulations to allow it to provide well
category determinations for Section 29 tax credits for well recompletions
commenced after January 1, 1993.

  Other Regulation

  The petroleum industry is also subject to compliance with various other
federal, state and local regulations and laws, including, but not limited to,
regulations and laws relating to environmental protection, occupational
safety, resource conservation and equal employment opportunity. Cross Timbers
Oil has advised the trustee that it does not believe that compliance with
these laws will have any material adverse effect upon the unitholders.

                                       9
<PAGE>

Item 3. Legal Proceedings

  Certain of the trust properties are involved in various lawsuits and certain
governmental proceedings arising in the ordinary course of business. Cross
Timbers Oil has advised the trustee that it does not believe that the ultimate
resolution of these claims will have a material effect on the trust's annual
distribution income, financial position or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

  No matters were submitted to a vote of unitholders during 2000.

                                      10
<PAGE>

                                    PART II

Item 5. Market for Units of the Trust and Related Security Holder Matters

  The section entitled "Units of Beneficial Interest" on page 1 of the trust's
Annual Report to Unitholders for the year ended December 31, 2000 is
incorporated herein by reference.

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                            Year Ended December 31,
                          -----------------------------------------------------------
                             2000        1999        1998        1997        1996
                          ----------- ----------- ----------- ----------- -----------
<S>                       <C>         <C>         <C>         <C>         <C>
Royalty Income..........  $11,660,510 $ 6,691,336 $ 7,079,632 $10,549,668 $ 8,269,875
Distributable Income....   11,502,114   6,549,803   6,927,338  10,407,250   8,076,964
Distributable Income per
 Unit...................     1.917019    1.091635    1.154555    1.734541    1.346162
Distributions per Unit..     1.917019    1.091635    1.154555    1.734541    1.346162
Total Assets at Year-
 End....................   31,806,794  33,919,338  36,554,480  38,767,918  42,716,284
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

  The "Trustee's Discussion and Analysis" of financial condition and results
of operations for the three-year period ended December 31, 2000 on pages 6
through 8 of the trust's Annual Report to Unitholders for the year ended
December 31, 2000 is incorporated herein by reference.

  Forward-Looking Statements

  Certain information included in this annual report and other materials filed
by the trust with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to
be made by Cross Timbers Oil or the trustee) contain forward-looking
statements within the meaning of Section 21E of the Securities and Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended, relating to the trust operations of the underlying properties and the
oil and gas industry. Such forward-looking statements may concern, among other
things, development activities, maintenance projects, development, production
and other costs, oil and gas prices, pricing differentials, proved reserves,
production levels, litigation, regulatory matters and competition. Such
forward-looking statements are based on Cross Timbers Oil's current plans,
expectations, assumptions, projections and estimates and are identified by
words such as "expects," "intends," "plans," "projects," "anticipates,"
"predicts," "believes," "goals," "estimates," "should," "could", and similar
words that convey the uncertainty of future events. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual results may
differ materially from expectations, estimates or assumptions expressed in,
implied in, or forecasted in such forward-looking statements. Any number of
factors could cause actual results to differ materially, including, but not
limited to, crude oil and natural gas price fluctuations, changes in the
underlying demand for oil and natural gas, changes in ownership and/or the
operator of the underlying properties, the timing and results of development
activity, the availability of drilling equipment, as well as general domestic
and international economic and political conditions.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

  The only assets of and sources of income to the trust are the net profits
interests, which generally entitle the trust to receive a share of the net
profits from oil and gas production from the underlying properties.
Consequently, the trust is exposed to market risk from fluctuations in oil and
gas prices. The trust is a passive entity and, other than the trust'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. In addition, the
trustee is prohibited by the trust indenture from engaging in any business
activity or causing the trust to enter

                                      11
<PAGE>

into any investments other than investing cash on hand in specific short-term
cash investments. Therefore, the trust cannot hold any derivative financial
instruments. As a result of the limited nature of the trust's borrowing and
investing activities, the trust is not subject to any material interest rate
market risk. Additionally, any gains or losses from any hedging activities
conducted by Cross Timbers Oil are specifically excluded from the calculation
of net proceeds due the trust under the forms of the conveyances. The trust
does not engage in transactions in foreign currencies which could expose the
trust to any foreign currency related market risk.

Item 8. Financial Statements and Supplementary Data

  The financial statements of the trust and the notes thereto, together with
the related report of Arthur Andersen LLP dated March 19, 2001, appearing on
pages 9 through 12 of the trust's Annual Report to Unitholders for the year
ended December 31, 2000 are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

  There have been no changes in accountants or disagreements with accountants
on any matter of accounting principles or practices or financial statement
disclosures during the two years ended December 31, 2000.

                                      12
<PAGE>

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

  The trust has no directors or executive officers. The trustee is a corporate
trustee which may be removed, with or without cause, by the affirmative vote
of the holders of a majority of all the units then outstanding.

Item 11. Executive Compensation

  The trustee received the following annual compensation from 1998 through
2000 as specified in the trust indenture:

<TABLE>
<CAPTION>
                                            Other Annual
     Name and Principal Position     Year Compensation (1)
     ---------------------------     ---- ---------------
     <S>                             <C>  <C>
     Bank of America, N.A., Trustee  2000     $5,830
                                     1999      3,346
                                     1998      3,540
</TABLE>

(1) Under the trust indenture, the trustee is entitled to an administrative
    fee of: (i) 1/20 of 1% of the first $100 million of the annual gross
    revenue of the trust, and 1/30 of 1% of the annual gross revenue of the
    trust in excess of $100 million, and (ii) trustees standard hourly rates
    for time in excess of 300 hours annually.

Item 12. Security Ownership of Certain Beneficial Owners and Management

  (a) Security Ownership of Certain Beneficial Owners. The following table
sets forth as of March 1, 2001 information with respect to each person known
to the trustee to beneficially own more than 5% of the outstanding units of
the trust:

<TABLE>
<CAPTION>
                                        Amount and Nature of  Percent
        Name and Address                Beneficial Ownership  of Class
        ----------------                --------------------  --------
        <S>                             <C>                   <C>
        Cross Timbers Oil Company         1,360,000 units (1)  22.7%
        810 Houston Street, Suite 2000
        Fort Worth, TX 76102
</TABLE>

(1) Cross Timbers Oil has the sole power to vote and dispose of 1,360,000
    units.

  (b) Security Ownership of Management. The trust has no directors or
executive officers. As of March 1, 2001, Bank of America, N.A. owned, in
various fiduciary capacities, 116,596 units with a shared right to vote 27,596
of these units and no right to vote 89,000 of these units. Bank of America,
N.A. disclaims any beneficial interests in these units. The number of units
reflected in this paragraph includes units held by all branches of Bank of
America, N.A.

  (c) Changes in Control. The trustee knows of no arrangements which may
subsequently result in a change in control of the trust.

Item 13. Certain Relationships and Related Transactions

  In computing royalty income paid to the trust for the 75% net profits
interests, Cross Timbers Oil deducts an overhead charge as reimbursement for
costs associated with monitoring these interests. This charge at December 31,
2000 was $22,570 per month, or $270,840 annually (net to the trust of $16,928
per month or $203,130 annually), and is subject to annual adjustment based on
an oil and gas industry index.

  During 2000, Bank of America, N.A. received $6,938 for oil and gas
consulting services performed on behalf of the trust. See Item 11 for the
remuneration received by the trustee from 1998 through 2000 and Item 12(b) for
information concerning units owned by the trustee, Bank of America, N.A., in
various fiduciary capacities.

                                      13
<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

  1.Financial Statements (incorporated by reference in Item 8 of this report)

    Report of Independent Public Accountants
    Statements of Assets, Liabilities and Trust Corpus at December 31, 2000
    and 1999
    Statements of Distributable Income for the years ended December 31,
    2000, 1999 and 1998
    Statements of Changes in Trust Corpus for the years ended December 31,
    2000, 1999 and 1998
    Notes to Financial Statements

  2.Financial Statement Schedules

       Financial statement schedules are omitted because of the absence of
       conditions under which they are required or because the required
       information is given in the financial statements or notes thereto.

  3. Exhibits

    (4) (a)  Cross Timbers Royalty Trust Indenture amended and restated on
             January 13, 1992 by NationsBank, N.A. (now Bank of America,
             N.A.), as trustee, heretofore filed as Exhibit 3.1 to the
             trust's Registration Statement No. 33-44385 filed with the
             Securities and Exchange Commission on February 19, 1992, is
             incorporated herein by reference.

      (b) Net Overriding Royalty Conveyance (Cross Timbers Royalty Trust,
          90%--Texas) from South Timbers Limited Partnership, West Timbers
          Limited Partnership, North Timbers Limited Partnership, East
          Timbers Limited Partnership, Hickory Timbers Limited Partnership,
          and Cross Timbers Partners, L.P. (predecessors of Cross Timbers
          Oil Company, L.P.) to NCNB Texas National Bank (now Bank of
          America, N.A.), as trustee, dated February 12, 1991 (without
          Schedules A and B), heretofore filed as Exhibit 10.1 to the
          trust's Registration Statement No. 33-44385 filed with the
          Securities and Exchange Commission on February 19, 1992, is
          incorporated herein by reference.

      (c) Net Overriding Royalty Conveyance (Cross Timbers Royalty Trust,
          75%--Texas) from South Timbers Limited Partnership, West Timbers
          Limited Partnership, North Timbers Limited Partnership, East
          Timbers Limited Partnership, Hickory Timbers Limited Partnership,
          and Cross Timbers Partners, L.P. (predecessors of Cross Timbers
          Oil Company, L.P.) to NCNB Texas National Bank (now Bank of
          America, N.A.), as trustee, dated February 12, 1991 (without
          Schedules A and B), heretofore filed as Exhibit 10.5 to the
          trust's Registration Statement No. 33-44385 filed with the
          Securities and Exchange Commission on February 19, 1992, is
          incorporated herein by reference.

    (13)  Cross Timbers Royalty Trust Annual Report to unitholders for the
          year ended December 31, 2000.

    (23.1)  Consent of Arthur Andersen LLP

    (23.2)  Consent of Miller and Lents, Ltd.

      Copies of the above Exhibits are available to any unitholder, at the
    actual cost of reproduction, upon written request to the trustee, Bank
    of America, N.A., P.O. Box 830650, Dallas, Texas 75283-0650.

(b) Reports on Form 8-K

  During the last quarter of the trust's fiscal year ended December 31, 2000,
there were no reports filed on Form 8-K by the trust with the Securities and
Exchange Commission.

                                      14
<PAGE>

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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.

                                          CROSS TIMBERS ROYALTY TRUST
                                          By BANK OF AMERICA, N.A., TRUSTEE

                                          By          RON E. HOOPER
                                            ___________________________________
                                                      Ron E. Hooper
                                                  Senior Vice President

                                          CROSS TIMBERS OIL COMPANY

Date: March 30, 2001                      By        LOUIS G. BALDWIN
                                            ___________________________________
                                                    Louis G. Baldwin
                                              Executive Vice President and
                                                 Chief Financial Officer

              (The trust has no directors or executive officers.)

                                      15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CROSS TIMBERS ROYALTY TRUST ANNUAL REPORT
<TEXT>

<PAGE>

CROSS TIMBERS ROYALTY TRUST
- --------------------------------------------------------------------------------

GLOSSARY OF TERMS
- -----------------

The following are definitions of significant terms used in this Annual Report:

Bbl               Barrel (of oil)

Bcf               Billion cubic feet (of natural gas)

Mcf               Thousand cubic feet (of natural gas)

MMBtu             One million British Thermal Units, a common energy measurement

net proceeds      Gross proceeds from sale of production from the underlying
                  properties, less applicable costs

net profits       An interest in an oil and gas property measured by net profits
interest          from the sale of production, rather than a specific portion of
                  production. The following are defined net profits interests
                  that were conveyed from the underlying properties to the
                  trust:

                  90% net profits interests - interests that entitle the trust
                  to receive 90% of the net proceeds from the underlying
                  properties that are royalty or overriding royalty interests in
                  Texas, Oklahoma and New Mexico

                  75% net profits interests - interests that entitle the trust
                  to receive 75% of the net proceeds from the underlying
                  properties that are working interests in Texas and Oklahoma

royalty income    Net proceeds multiplied by the applicable net profits
                  percentage of 75% or 90% and paid to the trust

royalty interest  A nonoperating interest in an oil and gas property that
(and overriding   provides the owner a specified share of  production without
royalty interest) any production or development costs


underlying        Cross Timbers Oil's interest in certain oil and gas
properties        properties from which the net profits interests were conveyed.
                  The underlying properties include royalty and overriding
                  royalty interests in producing and nonproducing properties in
                  Texas, Oklahoma and New Mexico, and working interests in
                  producing properties located in Texas and Oklahoma.

working interest  An operating interest in an oil and gas property that provides
                  the owner a specified share of production that is subject to
                  all production and development costs



Forward Looking Statements

This Annual Report, including the accompanying Form 10-K, includes "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.  All statements other than statements of historical fact included in
this Annual Report and Form 10-K, including, without limitation, statements
regarding estimates of proved reserves, future development plans and costs, and
industry and market conditions, are forward looking statements.  Although Cross
Timbers Oil believes that the expectations reflected in such forward looking
statements are reasonable, neither Cross Timbers Oil nor the trustee can give
any assurance that such expectations will prove to be correct.

                                                                               i
<PAGE>

THE TRUST
- --------------------------------------------------------------------------------

Cross Timbers Royalty Trust was created on February 12, 1991 by conveyance of
90% net profits interests in certain royalty and overriding royalty interest
properties in Texas, Oklahoma and New Mexico, and 75% net profits interests in
certain working interest properties in Texas and Oklahoma. Cross Timbers Oil
Company owns the underlying properties from which these net profits interests
were conveyed.  The net profits interests are the only assets of the trust,
other than cash held for trust expenses and for distribution to unitholders.

Royalty income received by the trust on the last business day of each month is
calculated and paid by Cross Timbers Oil based on net proceeds received from the
underlying properties in the prior month.  Distributions, as calculated by the
trustee, are paid to month-end unitholders of record within ten business days.


UNITS OF BENEFICIAL INTEREST
- --------------------------------------------------------------------------------

The units of beneficial interest in the trust are listed and traded on the New
York Stock Exchange under the symbol "CRT."  The following are the high and low
unit sales prices and total cash distributions per unit paid by the trust during
each quarter of 2000 and 1999:


                            Sales Price
                       --------------------   Distributions
    Quarter               High        Low       per Unit
- ---------------------  -----------  -------     --------

 2000
- ---------------------
First...............       $14.750  $ 9.500    $0.383466
Second..............        14.188   10.438     0.404105
Third...............        17.000   13.000     0.557722
Fourth..............        16.938   13.375     0.571726
                                               ---------
                                               $1.917019
                                               =========

 1999
- ---------------------
First...............       $10.125  $ 8.438  $0.240065
Second..............        10.750    9.000   0.195230
Third...............        13.875   10.125   0.276342
Fourth..............        12.750    9.250   0.379998
                                             ---------
                                             $1.091635
                                             =========

At December 31, 2000, there were 6,000,000 units outstanding and approximately
156 unitholders of record; 5,642,982 of these units were held by a depository
institution.  As of March 1, 2001, Cross Timbers Oil owned 1,360,000 units.

                                                                               1
<PAGE>

SUMMARY
- --------------------------------------------------------------------------------

The trust was created to collect and distribute monthly royalty income to
unitholders.  Trust royalty income is received from two major components, the
90% net profits interests and the 75% net profits interests.

  -  The 90% net profits interests were conveyed from underlying royalty and
     overriding royalty interests in producing properties in Texas, Oklahoma and
     New Mexico.  Most royalty income is from long-lived gas properties in the
     San Juan Basin of northwestern New Mexico.  Because the 90% net profits
     interests are not subject to production or development costs, royalty
     income from these interests generally only varies because of changes in
     sales volumes or prices.

  -  The 75% net profits interests were conveyed from underlying working
     interests in seven large, predominantly oil-producing properties in Texas
     and Oklahoma.  Royalty income from these properties is reduced by
     production and development costs.  If costs exceed revenues from the
     underlying working interest properties in either Texas or Oklahoma, the 75%
     net profits interests for that state will not contribute to trust royalty
     income until all excess costs and accrued interest have been recovered from
     future net proceeds of that state. However, such excess costs will not
     reduce royalty income from the other 75% net profits interests or from the
     90% net profits interests.  Because of excess costs, the Texas 75% net
     profits interests did not contribute to trust royalty income in 1999 and
     through April 2000, and the Oklahoma 75% net profits interests did not
     contribute to trust royalty income from February through June 1999 and for
     September 1999.  Such excess costs generally occur during periods of higher
     development activity and lower oil prices.  For further information, see
     "Trustee's Discussion and Analysis - Costs."

Unitholders may be eligible to receive the following tax benefits but should
consult their tax advisors:

  -  The Nonconventional Fuel Source Tax Credit is related to coal seam gas
     production through the year 2002 from wells drilled after December 31, 1979
     and prior to January 1, 1993 underlying the 90% net profits interests.
     Unitholders are entitled to this tax credit (also referred to as "coal seam
     tax credit") which may be used to reduce the unitholder's regular income
     tax liability.

  -  Cost Depletion is generally available to unitholders as a deduction from
     royalty income.  Available depletion is dependent upon the unitholder's
     cost of units, purchase date and prior allowable depletion.

      As an example, a unitholder that acquired units in January 2000 and held
      them throughout 2000 would be entitled to a cost depletion deduction of
      approximately 8% of his cost. Assuming a cost of $11.00 per unit, cost
      depletion would offset 44% of 2000 taxable trust income. After considering
      the coal seam tax credit and assuming a 30% tax rate, the 2000 taxable
      equivalent return as a percentage of unit cost would be 22%. (NOTE-Because
      the units are a depleting asset, a portion of this return is effectively a
      return of capital.)

The following summarizes the effect of the above components on distributions per
unit for the last three years:

<TABLE>
<CAPTION>
                                          2000              1999               1998
                                   -----------------  -----------------  ----------------
                                   Monthly    Annual  Monthly   Annual   Monthly   Annual
                                   Average     Total  Average    Total   Average    Total
                                   -------    ------  -------   -------  -------   ------
<S>                                <C>        <C>     <C>       <C>      <C>       <C>
Royalty Income

- - 90% net profits interests..       $ .129    $1.550   $ .088    $1.055   $ .094   $1.128

- - 75% net profits interests..         .033      .393     .005      .060     .004     .052

Administration expense
 (net of interest income)....        (.002)    (.026)   (.002)    (.023)   (.002)   (.025)
                                    ------    ------   ------    ------   ------   ------

Total Distribution...........       $ .160    $1.917   $ .091    $1.092   $ .096   $1.155
                                    ======    ======   ======    ======   ======   ======

Nonconventional Fuel
  Source Tax Credit..........            *    $ .120        *    $ .158        *   $ .162
                                              ======            =======            ======
</TABLE>
* - Not applicable

                                                                               2
<PAGE>

TO UNITHOLDERS
- --------------

We are pleased to present the 2000 Annual Report of Cross Timbers Royalty Trust
and the trust's 2000 Form 10-K.  Both of these reports contain important
information about the trust's net profits interests, including information
provided to the trustee by Cross Timbers Oil, and should be read in conjunction
with each other.

For the year ended December 31, 2000, royalty income totaled $11,660,510.  After
deducting trust administration expense and adding interest income, distributable
income was $11,502,114 or $1.917019 per unit.  Distributions for the year were
the highest since the trust's inception and were 76% higher than 1999 comparable
amounts because of higher product prices.

Natural gas prices for 2000 averaged $3.32 per Mcf for sales from the underlying
properties, a 67% increase from the 1999 average price of $1.99 per Mcf.  Gas
sales volumes from the underlying properties for the year ended December 31,
2000 totaled 3,080,601 Mcf, a 15% decrease from 1999 production of 3,643,023
Mcf. Gas volumes were lower primarily because of the timing of cash receipts and
coal seam gas production decline.

Oil sales volumes from the underlying properties during 2000 were 344,123 Bbls,
a 1% decline from 1999 levels.  The average oil price increased to $27.49 per
Bbl, up 85% from the 1999 average price of $14.88.

During 1998 and early 1999, costs exceeded revenues from the Texas 75% net
profits interests because of low oil prices and costs associated with a carbon
dioxide injection project.  With increased oil prices and completion of this
development project, the properties underlying the Texas 75% net profits
interests recovered $911,223 ($683,417 net to the trust) of excess costs and
accrued interest during the last half of 1999 and first half of 2000.  The Texas
75% net profits interests contributed $0.15 per unit to 2000 royalty income, or
8% of total distributions, as compared to 1999 when it did not contribute and
1998 when it contributed $0.02 per unit, or 1% of total 1998 distributions.

Coal seam gas sales volumes from the underlying properties were 874,819 Mcf in
2000, or a 25% decline from 1999 coal seam gas production of 1,173,950 Mcf.  The
resulting 2000 coal seam tax credit was $0.120389 per unit.  This credit (or a
portion thereof, if units were held less than the full year) is available to be
applied against a unitholder's regular federal income tax liability, subject to
certain limitations. Unitholders should consult their tax advisors regarding use
of this credit.

As of December 31, 2000, proved reserves of the net profits interests were
estimated by independent engineers to be 2,104,000 Bbls of oil and 34.8 Bcf of
natural gas.  Estimated oil reserves and gas reserves decreased 4% and 2%,
respectively, from year-end 1999 to 2000 primarily because of production.  All
reserve information prepared by independent engineers has been provided to the
trustee by Cross Timbers Oil.

Estimated future net revenues from proved reserves of the net profits interests
at December 31, 2000 are $357.2 million, or $59.53 per unit.  Using an annual
discount factor of 10%, the present value of estimated future net revenues at
December 31, 2000 is $169.4 million, or $28.24 per unit.  Proved reserve
estimates and related future net revenues have been determined based on a year-
end West Texas Intermediate posted oil price of $23.75 per barrel and a year-end
average realized gas price of $9.48 per Mcf.  Other guidelines used in
estimating proved reserves, as prescribed by the Financial Accounting Standards
Board, are described under Item 2 of the accompanying Form 10-K.   The present
value of estimated future net revenues is not necessarily indicative  of the
market value of trust units.

As discussed in the tax instructions provided to unitholders in February 2001,
trust distributions are considered portfolio income, rather than passive income.
Unitholders should consult their tax advisors for further information.

Cross Timbers Royalty Trust
By: Bank of America, N.A., Trustee

    /s/ RON E. HOOPER
By: Ron E. Hooper
    Senior Vice President

                                                                               3
<PAGE>

THE UNDERLYING PROPERTIES
- -------------------------

The underlying properties include over 2,900 producing properties with
established production histories in Texas, Oklahoma and New Mexico.  The average
reserve-to-production index for the underlying properties as of December 31,
2000 is approximately 13 years for oil and gas.  The reserve-to-production index
is calculated using total proved reserves and estimated 2001 production for the
underlying properties.  Based on estimated future net revenues at year-end oil
and gas prices, the proved reserves of the underlying properties are
approximately 14% oil and 86% natural gas.  The underlying properties also
include certain nonproducing properties in Texas, Oklahoma and New Mexico that
are primarily mineral interests.  Cross Timbers Oil cannot significantly
influence or control the operations of the underlying properties.

90% Net Profits Interests

Royalty and overriding royalty properties underlying the 90% net profits
interests represent 89% of the discounted future net cash flows from the trust's
proved reserves at December 31, 2000.  Approximately 95% of the discounted
future net cash flows from the 90% net profits interests is from gas reserves,
totaling 34.2 Bcf.  Oil reserves underlying the 90% net profits interests are
primarily located in West Texas and are estimated to be 678,000 Bbls at December
31, 2000.

Because the properties underlying the 90% net profits interests are royalty
interests and overriding royalty interests, royalty income from these properties
is not reduced by production and development costs. Additionally, royalty income
from these interests cannot be reduced by any excess costs of the 75% net
profits interests.  The trust, therefore, should generally receive monthly
royalty income from these interests, as determined by oil and gas sales volumes
and prices.

Most of the trust's gas reserves are located in the San Juan Basin of
northwestern New Mexico, one of the United States' largest natural gas fields.
The San Juan Basin royalties produced approximately 76% of gas sales volumes and
51% of royalty income for 2000.  As of December 31, 2000, the trust's proved
reserves in this region are estimated to be 28.3 Bcf, or 81% of total trust gas
reserves.

Approximately 28% of the trust's 2000 gas sales volumes were from coal seam
production in the San Juan Basin.  Through the year 2002, sales of production
from coal seam wells drilled after December 31, 1979 and prior to January 1,
1993 qualify for a federal income tax credit under Section 29 of the Internal
Revenue Code for nonconventional fuel sources.  This credit for 2000 coal seam
gas sales was approximately $1.06 per MMBtu or $0.120389 per unit, while the
coal seam credit for 1999 was $1.02 per MMBtu or $0.157564 per unit.  As of
December 31, 2000, the trust's proved coal seam gas reserves are estimated to be
4.4 Bcf, as compared with 5.4 Bcf at December 31, 1999.

Most of the trust's San Juan Basin conventional, or non-coal seam, production is
from the Mesa Verde formation, which has been approved for increased density
drilling.  Cross Timbers Oil believes that operators will further develop the
Mesa Verde formation underlying the net profits interests, and such future
development could significantly impact underlying gas sales volumes.  However,
minimal drilling is expected in 2001 because of  environmental concerns delaying
approval of drilling permits.

75% Net Profits Interests

Underlying the 75% net profits interests are working interests in seven large
properties in Texas and Oklahoma operated primarily by established oil
companies.  These properties are located in mature fields undergoing secondary
or tertiary recovery operations.  With its relatively minor working interest,
Cross Timbers Oil generally has little influence or control over operations on
any of these properties.

Proved reserves from the 75% net profits interests are almost entirely oil,
estimated to be approximately 1,426,000 Bbls at year-end 2000.  Based on year-
end oil and gas prices, proved reserves from these interests represent 11% of
the discounted future net cash flows of the trust's proved reserves at December
31, 2000.

Because these underlying properties are working interests,  production and
development costs are deducted in calculating royalty income from the 75% net
profits interests.  As a result, royalty income from these interests is affected
by the level of maintenance and development activity on these underlying
properties. Royalty income is also dependent upon oil sales volumes and prices
and is subject to reduction for any prior period excess costs.

Total 2000 development costs were $738,605, remaining relatively unchanged from
1999 development costs of $736,060.  First quarter 2001 development costs
totaled approximately $163,000; these costs are primarily related to fourth
quarter 2000 expenditures.

As reported to Cross Timbers Oil by unit operators in February of each year,
budgeted development costs were $356,000 for 2000 and $161,000 for 1999.  Actual
development costs often differ from amounts budgeted because of changes in
product prices that may affect the timing of projects.  Also, costs are deducted
in the calculation of trust royalty income several months after they are
incurred by the operator. Unit operators have reported to Cross Timbers Oil that
total budgeted costs are approximately $896,000 for 2001 and $717,000 for 2002,
net to Cross Timbers Oil's interests.

Higher development costs and lower oil prices during 1998 and early 1999 caused
costs to exceed revenues from the properties underlying the Texas 75% net
profits interests.  During 1999 and 2000, $911,223 ($683,417 net to the trust)
of such excess costs and accrued interest were recovered.  For information
regarding the effect of excess costs on trust royalty income, see "Trustee's
Discussion and Analysis - Years Ended December 31, 2000, 1999 and 1998 - Costs."

                                                                               4
<PAGE>

- --------------------------------------------------------------------------------
Estimated Proved Reserves and Future Net Revenues

The following are proved reserves of the underlying properties and proved
reserves and future net revenues from proved reserves of the net profits
interests at December 31, 2000, as estimated by independent engineers:

<TABLE>
<CAPTION>
                                              Underlying Properties                          Net Profits Interests
                                              ---------------------        -------------------------------------------------------
                                               Proved Reserves (a)         Proved Reserves (a) (b)        Future Net Revenues
                                              ---------------------        -----------------------    from Proved Reserves (a) (c)
                                               Oil             Gas          Oil               Gas     ----------------------------
                                              (Bbls)          (Mcf)        (Bbls)            (Mcf)    Undiscounted      Discounted
(in thousands)                                ------         ------        ------           ------    ------------      ----------
<S>                                           <C>             <C>          <C>              <C>       <C>               <C>
90% Net Profits Interests
 San Juan Basin
  Conventional.............                       71          26,555           64           23,899       $217,457        $ 92,007
  Coal Seam................                      -0-           4,898          -0-            4,408         36,779          24,190
                                              ------          ------       ------           ------    -----------      ----------
     Total.................                       71          31,453           64           28,307        254,236         116,197
 Other New Mexico..........                      116             297          104              276          4,606           2,666
 Texas.....................                      491           4,296          443            3,867         44,180          22,926
 Oklahoma..................                       75           1,951           67            1,757         16,810           8,970
                                              ------          ------       ------           ------    -----------      ----------
     Total.................                      753          37,997          678           34,207        319,832         150,759
                                              ------          ------       ------           ------    -----------      ----------
75% Net Profits Interests
 Texas.....................                    1,802             867          811              390         21,630           9,927
 Oklahoma..................                    1,688             513          615              183         15,730           8,741
                                              ------          ------       ------           ------    -----------      ----------
     Total.................                    3,490           1,380        1,426              573         37,360          18,668
                                              ------          ------       ------           ------    -----------      ----------

     TOTAL.................                    4,243          39,377        2,104           34,780       $357,192        $169,427
                                              ======          ======       ======           ======    ===========      ==========
</TABLE>

- -----------------------------------

(a) Based on year-end oil and gas prices.  Discounted estimated future net
    revenues from proved reserves increased 179% from year-end 1999 to 2000,
    primarily because of a 333% increase in year-end gas prices over these
    periods.  For further information regarding trust proved reserves, see Item
    2 of the accompanying Form 10-K.

(b) Since the trust has defined net profits interests, the trust does not own a
    specific percentage of the oil and gas reserves.  Because trust reserve
    quantities are determined using an allocation formula, any fluctuations in
    actual or assumed prices or costs will result in revisions to the estimated
    reserve quantities allocated to the net profits interests.

(c) Before income taxes (and the tax benefit of the estimated coal seam tax
    credit) since future net revenues are not subject to taxation at the trust
    level.

                                                                               5
<PAGE>

TRUSTEE'S DISCUSSION AND ANALYSIS
- ---------------------------------

Years Ended December 31, 2000, 1999 and 1998

Royalty income for 2000 was $11,660,510, as compared with $6,691,336 for 1999
and $7,079,632 for 1998. The 74% increase in royalty income from 1999 to 2000
was because of higher product prices.  The 5% decrease in royalty income from
1998 to 1999 was primarily because of recovery of prior year excess costs.
During 2000, 1999 and 1998, 64%, 79% and 80%, respectively, of royalty income
was derived from gas sales.

Trust administration expense was $185,624 in 2000 as compared to $152,631 in
1999 and $163,151 in 1998. Interest income was $27,228 in 2000, $11,098 in 1999
and  $10,857 in 1998.

Royalty income is recorded when received by the trust, which is the month
following receipt by Cross Timbers Oil, and generally two months after oil
production and three months after gas production.  Royalty income is generally
affected by three major factors:

   .  oil and gas sales volumes,
   .  oil and gas sales prices, and
   .  costs deducted in the calculation of royalty income.

Volumes

Underlying oil sales volumes decreased 1% from 1999 to 2000, as compared to a
11% decrease from 1998 to 1999.  Sales volume decreases in 2000 were related to
natural production decline and timing of cash receipts and were offset by
increased production from properties underlying the Texas 75% and 90% net
profits interests.  Approximately half the 1999 decline was attributable to a
temporary disruption of production resulting from mechanical complications on
one of the underlying Oklahoma working interest properties.  Production on this
property gradually increased over the last half of 1999.  The remainder of the
1999 decline in oil volumes was primarily because of natural production decline.

Underlying gas sales volumes decreased 15% from 1999 to 2000 as compared to a 4%
increase from 1998 to 1999.  Lower 2000 gas sales volumes were primarily because
of timing of cash receipts and coal seam gas production decline. Higher 1999
volumes were primarily attributable to significant receipts related to prior
periods.

Prices

The average oil price for 2000 was $27.49 per Bbl, 85% higher than the 1999
average oil price of $14.88, which was 11% higher than the 1998 average price of
$13.40.  Because of the two-month interval between oil production and receipt by
the trust of related royalty income, the 1998 average price includes the effect
of oil prices that began to weaken in December 1997 and continued to decline
through 1998.  West Texas Intermediate posted crude oil prices dropped to $8.00
per barrel in December 1998, the lowest level since 1978.  After OPEC members
and other oil producers agreed to production cuts in March 1999, oil prices
climbed through the remainder of 1999 and first quarter 2000.  Despite OPEC
production increases in 2000, increased demand sustained higher prices.  The
West Texas Intermediate ("WTI") posted price reached $34.25 per Bbl in September
2000, its highest level in 10 years.  Lagging demand, caused by a world economic
slowdown, has caused oil prices to decline in 2001.  OPEC members have responded
with production cuts which to date have not significantly affected prices.  The
average WTI posted price for January and February 2001 was $26.55, compared with
$27.39 for the year 2000 and $28.93 for fourth quarter 2000.  Recent trust oil
prices have averaged approximately $0.90 higher than the WTI posted price.

The 2000 average gas price was $3.32 per Mcf, a 67% increase from the 1999
average gas price of $1.99, which was 2% lower than the 1998 average price of
$2.03.  Prior to 1999, purchaser deductions were netted in the gas price.  As of
second quarter 1999, these purchaser deductions are included in taxes,
transportation and other costs (see "Costs" below).  Considering the effect of
this change in classification, gas prices increased 62% from 1999 to 2000 and
decreased 16% from 1998 to 1999.  Gas prices were lower in 1999 primarily
because of the abnormally warm winter of 1998-1999 across the United States that
resulted in higher levels of gas in storage.  Gas prices began to increase in
May 1999 and, after declining briefly at year end, continued to strengthen in
2000.  Higher gas prices have been supported by both lower gas storage levels
and increased demand for power generation.  NYMEX gas prices rose to a record
high of $10.10 per MMBtu in December 2000 as winter demand strained gas
supplies.  The average NYMEX price for January and February 2001 was $6.78 per
MMBtu.  The trust's recent gas prices have averaged approximately $0.30 per
MMBtu higher than the NYMEX price, primarily because of the effect of higher
natural gas liquids prices. San Juan Basin gas prices have continued to
strengthen relative to NYMEX prices because of demand from an improved
California economy and increased summer use of gas to generate electricity.

Costs

Because properties underlying the 90% net profits interests are royalty and
overriding royalty interests, the calculation of royalty income from these
interests only includes deductions for production and property taxes, legal
costs, and marketing and transportation charges.  In addition to these costs,
the calculation of royalty income from the 75% net profits interests includes
deductions for production and development costs since the related underlying
properties are working interests.  Royalty income is calculated monthly for each
of the five conveyances under which the net profits interests were conveyed to
the trust.  If monthly costs exceed revenues for any conveyance, such excess
costs cannot reduce royalty income from other conveyances, but must be
recovered, with accrued interest, from future net proceeds of that conveyance.

Before adjustment for excess costs (see "Excess Costs" below), total costs
deducted in the calculation of royalty income were $5,826,375 in 2000,
$4,732,936 in 1999 and $4,919,005 in 1998.  The 23% increase in costs from 1999
to 2000 is primarily attributable to increased production and property tax and
other purchaser deductions associated with higher revenues.  The 4% decrease in
costs from 1998 to 1999 is primarily the result of decreased development costs
and production expense, offset by increased purchaser deductions for gathering
and compression charges (included in taxes, transportation and other) which had
been netted in the gas sales price prior to second quarter 1999.  Higher 1998
development costs were primarily associated with a carbon dioxide injection
project on one of the properties underlying the Texas 75% net profits interests.

Excess Costs

During 1999, costs exceeded revenues for properties underlying the Texas 75% net
profits interests by $327,318 and for the properties underlying the

                                                             Continued on page 8

                                                                               6
<PAGE>

- --------------------------------------------------------------------------------
Calculation of Royalty Income

The following is a summary of the calculation of royalty income received by the
trust:
<TABLE>
<CAPTION>
                                                                                      Three Months
                                              Year Ended December 31 (a)          Ended December 31 (a)
                                        --------------------------------------   ----------------------
                                            2000         1999          1998         2000        1999
                                        -----------  -----------   -----------   ----------  ----------
<S>                                    <C>           <C>           <C>           <C>         <C>
Sales Volumes
 Oil (Bbls) (b)
  Underlying properties.....                344,123      348,609       392,369       81,865      94,307
      Average per day.......                    940          955         1,075          890       1,025
  Net profits interests.....                163,219       97,677       104,774       41,264      34,379

 Gas (Mcf) (b)
  Underlying properties.....              3,080,601    3,643,023     3,502,093      683,897     973,070
      Average per day.......                  8,417        9,981         9,595        7,434      10,577
  Net profits interests.....              2,689,259    3,162,942     3,018,666      598,457     838,047

Average Sales Price
 Oil (per Bbl)..............                 $27.49       $14.88        $13.40       $31.18      $20.21
 Gas (per Mcf)..............                  $3.32        $1.99         $2.03        $4.33       $2.39

Revenues
 Oil sales..................            $ 9,459,575  $ 5,189,030   $ 5,256,626   $2,552,251  $1,905,541
 Gas sales..................             10,231,063    7,260,100     7,093,431    2,959,679   2,324,001
                                        -----------  -----------   -----------   ----------  ----------
  Total Revenues............             19,690,638   12,449,130    12,350,057    5,511,930   4,229,542
                                        -----------  -----------   -----------   ----------  ----------

Costs
 Taxes, transportation
   and other................              2,566,816    1,606,058     1,192,864      640,856     498,362
 Production expense (c).....              2,520,954    2,390,818     2,583,000      658,350     595,221
 Development costs..........                738,605      736,060     1,143,141      230,765     119,903
 Excess costs...............                      -     (432,789)     (515,078)           -           -
 Recovery of excess costs
  and accrued interest......                383,836      634,277        10,184            -     396,230
                                        -----------  -----------   -----------   ----------  ----------
  Total Costs...............              6,210,211    4,934,424     4,414,111    1,529,971   1,609,716
                                        -----------  -----------   -----------   ----------  ----------

Net Proceeds................            $13,480,427  $ 7,514,706   $ 7,935,946   $3,981,959  $2,619,826
                                        ===========  ===========   ===========   ==========  ==========
Royalty Income..............            $11,660,510  $ 6,691,336   $ 7,079,632   $3,436,186  $2,301,221
                                        ===========  ===========   ===========   ==========  ==========
</TABLE>

(a) Because of the interval between time of production and receipt of royalty
    income by the trust, oil and gas sales for the year ended December 31
    generally relate to oil production from November through October and gas
    production from October through September, while oil and gas sales for the
    three months ended December 31 generally relate to oil production from
    August through October and gas production from July through September.

(b) Oil and gas sales volumes are allocated to the net profits interests based
    upon a formula that considers oil and gas prices and the total amount of
    production expenses and development costs. Changes in any of these factors
    may result in disproportionate fluctuations in volumes allocated to the net
    profits interests. Therefore, comparative analysis is based on the
    underlying properties.

(c) Includes an overhead fee which is deducted and retained by Cross Timbers
    Oil. As of December 31, 2000, this fee was $22,570 per month and is subject
    to adjustment each May based on an oil and gas industry index.
- --------------------------------------------------------------------------------

                                                                               7
<PAGE>

Oklahoma 75% net profits interests by $105,471.  Excess costs for the Texas 75%
net profits interests were primarily the result of low oil prices and increased
development costs related to the 1998 carbon dioxide injection project, while
excess costs for the Oklahoma 75% net profits interests were primarily related
to low oil prices and reduced oil sales volumes related to mechanical
complications on one of the underlying properties.

Excess costs from one conveyance cannot reduce royalty income computed under
another conveyance, but must be recovered from future net proceeds of the same
conveyance before the conveyance can again contribute to trust royalty income.
With improved oil prices, recoveries of excess costs and accrued interest
totaled $911,222 for the Texas 75% net profits interests and $106,890 for the
Oklahoma 75% net profits interests in the last half of 1999 and first half of
2000.  Excess costs and accrued interest were fully recovered for the Texas 75%
net profits interests in April 2000 and for the Oklahoma 75% net profits
interests in October 1999.

Fourth Quarter 2000 and 1999

During the quarter ended December 31, 2000, the trust received royalty income
totaling $3,436,186, compared with fourth quarter 1999 royalty income of
$2,301,221.  The 49% increase in royalty income from fourth quarter 1999 to 2000
was primarily because of higher oil and gas prices.

Administration expense was $14,749 and interest income was $8,919, resulting in
fourth quarter 2000 distributable income of $3,430,356, or $0.571726 per unit.
Distributable income for fourth quarter 1999 was $2,279,988 or $0.379998 per
unit.  Distributions to unitholders for the quarter ended December 31, 2000
were:

                   Record Date         Payment Date     Per Unit
                ------------------  -----------------  ----------
                October 31, 2000    November 14, 2000   $0.196948
                November 30, 2000   December 14, 2000    0.199555
                December 29, 2000   January 16, 2001     0.175223
                                                       ----------
                                                        $0.571726
                                                       ==========

Volumes

Fourth quarter 2000 underlying oil sales volumes were 81,865 Bbls, or 13% below
1999 levels.  Lower oil volumes are primarily because of the timing of cash
receipts and prior period adjustments.  Underlying gas sales volumes were
683,897 Mcf, or 30% below 1999 levels, primarily because of significant receipts
in fourth quarter 1999 related to prior periods.

Prices

The average fourth quarter 2000 oil price was $31.18 per Bbl, 54% higher than
the fourth quarter 1999 average price of $20.21.  The average fourth quarter gas
price was $4.33 per Mcf in 2000, 81% higher than the fourth quarter 1999 average
price of $2.39.  For further information about oil and gas prices, see "Years
Ended December 31, 2000, 1999 and 1998 - Prices" above.

Costs

Costs deducted in the calculation of fourth quarter 2000 royalty income
increased $316,485, or 26%, from fourth quarter 1999 before adjustment for
excess costs.  This was primarily the result of increased production and
property tax associated with higher revenues and higher development costs
primarily related to a carbon dioxide project on one of the properties
underlying the Texas 75% net profits interests.

Excess costs of $396,230 ($297,173 net to the trust) were recovered during
fourth quarter 1999.  Recovery of excess costs were the result of higher oil
prices and decreased development costs related to the 1998 carbon dioxide
injection project on one of the properties underlying the Texas 75% net profits
interests.  See "Years Ended December 31, 2000, 1999 and 1998 - Costs" above.

See Item 7a of the accompanying Form 10-K for disclosures of market risks
affecting the trust.

                                                                               8
<PAGE>

Cross Timbers Royalty Trust
- --------------------------------------------------------------------------------

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

<TABLE>
<CAPTION>

                                                      December 31
                                                ------------------------
                                                   2000         1999
                                                -----------  -----------
<S>                                             <C>          <C>
Assets

 Cash and short-term investments..............  $ 1,048,031  $   912,164

 Interest to be received......................        3,307        1,840

 Net profits interests in oil and gas
  properties - net (Notes 1 and 2)............   30,755,456   33,005,334
                                                -----------  -----------

                                                $31,806,794  $33,919,338
                                                ===========  ===========

Liabilities and Trust Corpus

 Distribution payable to unitholders..........  $ 1,051,338  $   914,004

 Trust corpus (6,000,000 units of beneficial
  interest authorized and outstanding)........   30,755,456   33,005,334
                                                -----------  -----------

                                                $31,806,794  $33,919,338
                                                ===========  ===========
</TABLE>

- --------------------------------------------------------------------------------

STATEMENTS OF DISTRIBUTABLE INCOME

<TABLE>
<CAPTION>

                                                  Year Ended December 31
                                         -----------------------------------------
                                             2000          1999           1998
                                         ------------   -----------    -----------
<S>                                      <C>            <C>           <C>
Royalty income.........................  $ 11,660,510   $ 6,691,336    $ 7,079,632

Interest income........................        27,228        11,098         10,857
                                         ------------   -----------    -----------

 Total income..........................    11,687,738     6,702,434      7,090,489

Administration expense.................       185,624       152,631        163,151
                                         ------------   -----------    -----------

 Distributable income..................  $ 11,502,114   $ 6,549,803    $ 6,927,338
                                         ============   ===========    ===========

 Distributable income per unit
   (6,000,000 units)...................  $   1.917019   $  1.091635    $  1.154555
                                         ============   ===========    ===========
</TABLE>
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN TRUST CORPUS
<TABLE>
<CAPTION>

                                                  Year Ended December 31
                                         -----------------------------------------
                                              2000          1999           1998
                                         ------------   -----------    -----------
<S>                                      <C>            <C>            <C>
Trust corpus
  beginning of year....................  $ 33,005,334   $36,024,941    $38,104,367

Amortization of net
  profits interests....................    (2,249,878)   (3,019,607)    (2,079,426)

Distributable income...................    11,502,114     6,549,803      6,927,338

Distributions declared.................   (11,502,114)   (6,549,803)    (6,927,338)
                                         ------------   -----------    -----------

Trust corpus
  end of year..........................  $ 30,755,456   $33,005,334    $36,024,941
                                         ============   ===========    ===========
</TABLE>

- --------------------------------------------------------------------------------

See Accompanying Notes to Financial Statements.

                                                                               9
<PAGE>

Cross Timbers Royalty Trust
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS


1.  Trust Organization and Provisions

    Cross Timbers Royalty Trust was created on February 12, 1991 by predecessors
of Cross Timbers Oil, when the following net profits interests were conveyed
under five separate conveyances to the trust effective October 1, 1990, in
exchange for 6,000,000 units of beneficial interest in the trust:

    -  90% defined net profits interests in certain producing and nonproducing
       royalty interest properties in Texas, Oklahoma and New Mexico, and
    -  75% defined net profits interests in certain nonoperated working interest
       properties in Texas and Oklahoma.

    The underlying properties from which the net profits interests were carved
are currently owned by Cross Timbers Oil.  Bank of America, N.A. is the trustee
of the trust.  The trust indenture provides, among other provisions, that:

    -  the trust may not engage in any business activity or acquire any assets
       other than the net profits interests and specific short-term cash
       investments;
    -  the trust may not dispose of all or part of the net profits interests
       unless approved by 80% of the unitholders, or upon trust termination, and
       any sale must be for cash with the proceeds promptly distributed to the
       unitholders;
    -  the trustee may establish a cash reserve for payment of any liability
       that is contingent or not currently payable;
    -  the trustee may borrow funds required to pay trust liabilities if fully
       repaid prior to further distributions to unitholders;
    -  the trustee will make monthly cash distributions to unitholders (Note 3);
       and
    -  the trust will terminate upon the first occurrence of:
         -  disposition of all net profits interests pursuant to terms of the
            trust indenture,
         -  gross revenue of the trust is less than $1 million per year for two
            successive years, or
         -  a vote of 80% of the unitholders to terminate the trust in
            accordance with provisions of the trust indenture.


2.  Basis of Accounting

    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 generally accepted accounting principles:

    -  Royalty income is recorded in the month received by the trustee (Note 3).
    -  Interest income, interest to be received and distribution payable to
       unitholders include interest to be earned on royalty income from the
       monthly record date (last business day of the month) through the date of
       the next distribution.
    -  Trust expenses are recorded based on liabilities paid and cash reserves
       established by the trustee for liabilities and contingencies.
    -  Distributions to unitholders are recorded when declared by the trustee
       (Note 3).

    The most significant differences between the trust's financial statements
and those prepared in accordance with generally accepted accounting principles
are:

    -  Royalty income is recognized in the month received rather than accrued in
       the month of production.
    -  Expenses are recognized when paid rather than when incurred.
    -  Cash reserves may be established by the trustee for certain contingencies
       that would not be recorded under generally accepted accounting
       principles.

    The initial carrying value of the net profits interests of $61,100,449 was
Cross Timbers Oil's historical net book value of the interests on February 12,
1991, the date of the transfer to the trust.  Amortization of the net profits
interests is calculated on a unit-of-production basis and charged directly to
trust corpus.  Accumulated amortization was $30,344,993 as of December 31, 2000
and was $28,095,115 as of December 31, 1999.

3.  Distributions to Unitholders

    The trustee determines the amount to be distributed to unitholders each
month by totaling royalty income and other cash receipts, and subtracting
liabilities paid and adjustments in cash reserves established by the trustee.
The resulting amount (with estimated interest to be received on such amount
through the distribution date) is distributed to unitholders of record within
ten business days after the monthly record date, the last business day of the
month.

    Royalty income received by the trustee consists of net proceeds received in
the prior month by Cross Timbers Oil from the underlying properties multiplied
by the net profits percentage of 90% or 75%.  Net proceeds are the gross
proceeds received from the sale of production, less applicable costs.  For the
90% net profits interests, such costs generally include applicable taxes,
transportation, legal and marketing charges, and do not include other production
and development costs.  For the 75% net profits interests, such costs include
production costs, development and drilling costs, applicable taxes, operating
charges and other costs.

    Cross Timbers Oil, as owner of the underlying properties, computes royalty
income separately for each of the five conveyances (Note 1).  If costs exceed
gross proceeds for any conveyance, such excess costs cannot be used to reduce
the amounts to be received under the other conveyances.  The trust is not liable
for excess costs; however, future royalty income from the net profits interests
created by that conveyance will be reduced by such excess costs plus accrued
interest.  See Note 5.


4.  Federal Income Taxes

    Tax counsel has advised the trust that, under current tax laws, the trust
will be classified as a grantor trust for federal income tax purposes and
therefore is not subject to taxation at the trust level. However, the opinion of
tax counsel is not binding on the Internal Revenue Service.

    For federal income tax purposes, unitholders of a grantor trust are
considered to own the trust's income and principal as though no trust were in
existence.  The income of the trust is deemed to be received or accrued by the
unitholders at the time such income is received or accrued by the trust, rather
than when distributed by the trust.

    Cross Timbers Oil has advised the trustee that the trust receives royalty
income from coal seam gas wells.  Production from coal seam gas wells drilled
between December 31, 1979 and January 1, 1993 qualifies for the federal income
tax credit for producing nonconventional fuels under Section 29 of the Internal
Revenue Code.  This tax credit was approximately $1.06 per MMBtu ($0.120389 per
unit) in 2000, $1.02 per MMBtu ($0.157564 per unit) in 1999 and $1.05 per MMBtu
($0.162287 per unit) in 1998.  Such credit, based on the unitholder's pro rata
share of qualifying production, may not reduce the unitholder's regular tax
liability (after the foreign tax credit and certain other nonrefundable credits)
below his tentative minimum tax.  Any part of the Section 29 credit not allowed
for the tax year solely because of this limitation may be carried over
indefinitely as a credit against the unitholder's regular tax liability, subject
to the tentative minimum tax limitation.

                                                                              10
<PAGE>

5.  Excess Costs

    Cross Timbers Oil has advised the trustee that costs exceeded revenues from
the underlying properties of the 75% net profits interests during the years
ended December 31, 1999 and 1998, which were recovered during these years and
the year ended December 31, 2000.  Excess costs and accrued interest for each
conveyance must be fully recovered from the respective future net proceeds of
the 75% net profits interests before they can again contribute to trust royalty
income.  The following is a summary of changes in excess costs and recoveries by
conveyance during these periods.

<TABLE>
<CAPTION>

                                                       Year Ended December 31,
                                       -------------------------------------------------------
                                          2000             1999                   1998
                                       ---------   ---------------------   ------------------
                                         Texas       Texas     Oklahoma     Texas    Oklahoma
                                       ---------   ---------   ---------   --------  --------
<S>                                    <C>         <C>         <C>         <C>       <C>
Excess costs and accrued interest -
  beginning of period................  $ 375,802   $ 519,817   $       -   $      -  $      -
Excess costs.........................          -     327,318     105,471    505,011    10,067
Accrued interest.....................      8,034      56,054       1,419     14,806       117
Recovery of excess costs
 and accrued interest................   (383,836)   (527,387)   (106,890)         -   (10,184)
                                       ---------   ---------   ---------   --------  --------

Excess costs and accrued interest -
 end of period.......................  $       -   $ 375,802   $       -   $519,817  $      -
                                       =========   =========   =========   ========  ========

Net to trust (75%)...................  $       -   $ 281,852   $       -   $389,863  $      -
                                       =========   =========   =========   ========  ========
</TABLE>

6.  Cross Timbers Oil Company

    In computing royalty income paid to the trust for the 75% net profits
interests (Note 3), Cross Timbers Oil deducts an overhead charge as
reimbursement for costs associated with monitoring these interests.  This charge
at December 31, 2000 was $22,570 per month, or $270,840 annually (net to the
trust of $16,928 per month or $203,130 annually), and is subject to annual
adjustment based on an oil and gas industry index.

    Cross Timbers Oil does not operate or control any of the underlying
properties.  However, Cross Timbers Oil operates working interests from which
approximately 20 overriding royalty interests were conveyed.  Cross Timbers Oil
acquired these working interests after the overriding royalty interests were
conveyed to the trust.  As of March 1, 2001, Cross Timbers Oil owned 22.7% of
the outstanding trust units.


7.  Supplemental Oil and Gas Reserve Information (Unaudited)

    Proved oil and gas reserve information is included in Item 2 of the trust's
Annual Report on Form 10-K which is included in this report.


8.  Quarterly Financial Data (Unaudited)

    The following is a summary of royalty income, distributable income and
distributable income per unit by quarter for 2000 and 1999:

<TABLE>
<CAPTION>

                                                                        Distributable
                                               Royalty     Distributable   Income
                                               Income         Income      per Unit
                                            -------------  -------------  ---------
<S>                                         <C>            <C>            <C>
2000
- ----
First Quarter.............................    $ 2,352,880    $ 2,300,796  $0.383466
Second Quarter............................      2,477,134      2,424,630   0.404105
Third Quarter.............................      3,394,310      3,346,332   0.557722
Fourth Quarter............................      3,436,186      3,430,356   0.571726
                                              -----------    -----------  ---------
                                              $11,660,510    $11,502,114  $1.917019
                                              ===========    ===========  =========
1999
- ----
First Quarter.............................    $ 1,479,855    $ 1,440,388  $0.240065
Second Quarter............................      1,213,539      1,171,375   0.195230
Third Quarter.............................      1,696,721      1,658,052   0.276342
Fourth Quarter............................      2,301,221      2,279,988   0.379998
                                              -----------    -----------  ---------
                                              $ 6,691,336    $ 6,549,803  $1.091635
                                              ===========    ===========  =========
</TABLE>

                                                                              11
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------------------

Bank of America, N.A., as Trustee for the Cross Timbers Royalty Trust:

    We have audited the accompanying statements of assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust as of December 31, 2000 and 1999, and
the related statements of distributable income and changes in trust corpus for
each of the three years in the period ended December 31, 2000.  These financial
statements are the responsibility of the trustee.  Our responsibility is to
express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by the trustee, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

    As described in Note 2 to the financial statements, these financial
statements were prepared on the modified cash basis of accounting, which is a
comprehensive basis of accounting other than accounting principles generally
accepted in the United States.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets, liabilities and trust corpus of the trust
as of December 31, 2000 and 1999 and its distributable income and changes in
trust corpus for each of the three years in the period ended December 31, 2000,
in conformity with the modified cash basis of accounting described in Note 2.

/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Fort Worth, Texas
March 19, 2001

                                                                              12
<PAGE>

CROSS TIMBERS ROYALTY TRUST
- ---------------------------

901 Main Street, 17th Floor
P.O. Box 830650
Dallas, Texas 75283-0650
(877) 228-5084
Bank of America, N.A., Trustee

A copy of the Cross Timbers Royalty Trust Form 10-K
has been provided with this Annual Report.  Additional copies
of this Annual Report and Form 10-K will be provided to
unitholders without charge upon request.

AUDITORS
- --------

Arthur Andersen LLP
Fort Worth, Texas

LEGAL COUNSEL
- -------------

Thompson & Knight L.L.P.
Dallas, Texas

TAX COUNSEL
- -----------

Winstead Sechrest & Minick P.C.
Houston, Texas

TRANSFER AGENT AND REGISTRAR
- ----------------------------

Mellon Investor Services, L.L.C.
Dallas, Texas
www.melloninvestor.com
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>CONSENT OF ARTHUR ANDERSEN LLP
<TEXT>

<PAGE>

                                                                    EXHIBIT 23.1



                    INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT


Cross Timbers Royalty Trust
Dallas, Texas

As independent public accountants, we hereby consent to the incorporation by
reference in Amendment No. 1 to Registration Statement No. 333-56983 on Form S-3
of Cross Timbers Oil Company and Cross Timbers Royalty Trust and in the Post-
Effective Amendment No. 1 to the Registration Statement No. 33-55784 on Form S-8
of Cross Timbers Oil Company of our report dated March 19, 2001, included in the
Annual Report on Form 10-K of Cross Timbers Royalty Trust for the year ended
December 31, 2000.


/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Fort Worth, Texas
March 30, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>CONSENT OF MILLER AND LENTS, LTD.
<TEXT>

<PAGE>

                                                                    EXHIBIT 23.2


              [LETTERHEAD OF MILLER AND LENTS, LTD. APPEARS HERE]

                              March 30, 2001

Cross Timbers Royalty Trust
P.O. Box 830650
Dallas, TX 75283-0650

     Re:  Cross Timbers Royalty Trust
          2000 Annual Report on Form 10-K

Gentlemen:

     The firm of Miller and Lents, Ltd., consents to the use of its name and to
the use of its report dated March 29, 2001, regarding the Cross Timbers Royalty
Trust Proved Reserves and Future Net Revenue as of January 1, 2001, in the 2000
Annual Report on Form 10-K.

     Miller and Lents, Ltd., has no interests in the Cross Timbers Royalty Trust
or in any affiliated companies or subsidiaries and is not to receive any such
interest as payment for such reports and has no director, officer, or employee
otherwise connected with Cross Timbers Royalty Trust.  We are not employed by
Cross Timbers Royalty Trust on a contingent basis.

                              Yours very truly,

                              MILLER AND LENTS, LTD.


                              By     /s/  James C. Pearson
                                   -----------------------
                                   James C. Pearson
                                   President

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
