<PAGE>   1

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                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001.

                                       OR

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

For the transition period from .............. to ...............

Commission file number 1-8581

                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                            <C>
                         TEXAS                                                72-6108468
     (State or other jurisdiction of incorporation                         (I.R.S. Employer
                    or organization)                                      Identification No.)

           THE CHASE MANHATTAN BANK, TRUSTEE                                     78701
                       700 LAVACA                                             (Zip Code)
                     AUSTIN, TEXAS
        (Address of principal executive offices)
</TABLE>

       Registrant's telephone number, including area code: (512) 479-2562

                      ....................................

   (Former name, former address and former fiscal year, if changed since last
                                    report)

     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  ______
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<PAGE>   2

                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Part I.  Financial Information

  Item 1.  Financial Statements:
     Statements of Royalty Proceeds and Distributable
      Cash..................................................    3
     Statements of Assets, Liabilities and Trust Corpus.....    3
     Statements of Changes in Trust Corpus..................    3
     Notes to Financial Statements..........................    4
     Report of Independent Public Accountants...............    9

  Item 2.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations....................    10

Part II.  Other Information

  Item 6.  Exhibits and Reports on Form 8-K.................    14

Signature...................................................    15
</TABLE>

                                      --2--
<PAGE>   3

                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST
             STATEMENTS OF ROYALTY PROCEEDS AND DISTRIBUTABLE CASH
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                      MARCH 31,
                                                              --------------------------
                                                                 2001           2000
                                                              -----------    -----------
<S>                                                           <C>            <C>
Royalty proceeds............................................  $        --    $        --
Trust Administrative expenses...............................     (106,800)       (74,614)
Interest Income.............................................        7,262         10,611
Reserve for future Trust expenses...........................       99,538         64,003
                                                              -----------    -----------
Distributable Cash..........................................  $        --    $        --
                                                              ===========    ===========
Distributable Cash per Unit.................................  $        --    $        --
                                                              ===========    ===========
Units Outstanding...........................................   14,975,390     14,975,390
                                                              ===========    ===========
</TABLE>

              STATEMENTS OF ASSETS, LIABILITIES, AND TRUST CORPUS

<TABLE>
<CAPTION>
                                                                MARCH 31,      DECEMBER 31,
                                                                  2001             2000
                           ASSETS                             -------------    -------------
                                                               (UNAUDITED)
<S>                                                           <C>              <C>
Cash and short-term investments.............................  $     515,921    $     615,459
Net overriding royalty interest in oil and gas properties...    189,875,741      189,875,741
Less, accumulated amortization of net overriding royalty
  interest..................................................   (189,875,741)    (189,875,741)
                                                              -------------    -------------
          Total assets......................................  $     515,921    $     615,459
                                                              =============    =============

                LIABILITIES AND TRUST CORPUS
Reserve for future Trust expenses...........................  $     515,921    $     615,459
Trust corpus (14,975,390) Units of Beneficial Interest
  authorized issued and outstanding)........................             --               --
                                                              -------------    -------------
          Total liabilities and trust corpus................  $     515,921    $     615,459
                                                              =============    =============
</TABLE>

                     STATEMENTS OF CHANGES IN TRUST CORPUS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              --------------------
                                                                2001        2000
                                                              --------    --------
<S>                                                           <C>         <C>
Trust Corpus, beginning of year.............................  $     --    $     --
Royalty proceeds and interest income, net of trust
  administrative expenses and reserve for future Trust
  expenses..................................................        --          --
Distributions payable to Unit holders.......................        --          --
Amortization of net overriding royalty interest.............        --          --
                                                              --------    --------
Trust Corpus, end of period.................................  $     --    $     --
                                                              ========    ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      --3--
<PAGE>   4

                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST

                         NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND STATUS

     Freeport-McMoRan Oil and Gas Royalty Trust (the Trust) was created
effective September 30, 1983. On that date, Freeport-McMoRan Inc. (FTX)
transferred to a Partnership (the Partnership) a net overriding royalty interest
in certain offshore oil and gas properties equal to 90 percent of the Net
Proceeds (as defined in the Conveyance referred to below) from FTX's working
interests in such properties and conveyed a 99.9 percent general partnership
interest in the Partnership to the Trust. Such net overriding royalty interest
is referred to herein as the "Royalty." The Overriding Royalty Conveyance which
created the Royalty is referred to herein as the "Conveyance." IMC Global Inc.
("IMC") succeeded to FTX effective December 22, 1997, following the merger of
FTX into IMC. Accordingly, IMC is now the Working Interest Owner and owns the
oil and gas interests burdened by the Royalty. The Conveyance provides that the
owner of the interests burdened by the Royalty will calculate and pay monthly to
the Partnership an amount equal to 90 percent of the net proceeds for the
preceding month. Net proceeds generally consist of the excess of gross revenues
received from the Royalty Properties (Gross Proceeds), on a cash basis, over
operating costs, capital expenditures and other charges, on an accrual basis
(Net Proceeds). The Trust is passive, with Chase Manhattan Bank as Trustee. The
Trustee has only such powers as are necessary for the collection and
distribution of revenues attributable to the Royalty, the payment of Trust
liabilities and the protection of Trust assets.

     The Trust Indenture provides generally that the Trust shall terminate upon
the first to occur of: (i) the sale of all the Trust's interest in the
Partnership, or the sale by the Partnership of all the assets of the Partnership
including the Royalty, or (ii) a decision to terminate the Trust by the
affirmative vote of Unit holders representing a majority of the Units. The Trust
Indenture also provides that if the amount of cash per year for five successive
years is less than $3 million, the Trustee will sell the Trust's interest in the
Partnership or cause the Partnership to sell the Royalty.

     The Trust's cash receipts last reached $3 million during 1995 and there
have been no cash receipts since 1995. Therefore, the Trust indenture provides
the Trustee must sell the Trust's interest in the Partnership or cause the
Partnership to sell the Royalty. The Trustee is currently investigating
alternatives to fulfill its responsibilities in that regard.

     Ryder Scott Company Petroleum Engineers conducted an independent review of
the oil and gas interest burdened by the Royalty and prepared estimates, as of
December 31, 2000, of the discounted present value of future net revenues from
proved reserves attributable to the Royalty. The estimates were prepared in
accordance with SEC regulations, which among other things require that estimated
net revenues be based on prices and costs as of December 31, 2000. Ryder Scott
estimated that the net present value (discounted at 10%) of proved reserves
attributable to the Royalty was $15.5 million and that the undiscounted
estimated future net revenues from proved reserves were $18.4 million as of
December 31, 2000. However, the estimates do not take into account many
additional factors that impact the value of the Royalty, including the
following:

        - Pursuant to the Conveyance, the Working Interest Owner is entitled to
          recoup certain costs before any payments are made with respect to the
          Royalty. When these costs cannot be paid out of
                                      --4--
<PAGE>   5
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

current revenue, they are accrued and carried forward. As of March 31, 2000, the
accumulated cost carry-forward was approximately $17.3 million. The estimated
         discounted present value and undiscounted future net revenues prepared
         by Ryder Scott did not take into account the cost carry-forward as of
         December 31, 2000.

        - The Ryder Scott estimates took into account only those reserves that
          were classified as proved reserve as of December 31, 2000, and only
          the estimated costs of developing and producing those proved reserves.
          Thus, the estimates did not take into account costs that may be
          incurred to discover, develop or produce reserves not classified as
          proved as of December 31, 2000, nor did they take into account future
          revenues, if any, from such reserves.

        - Proceeds from gas produced but sold by other parties pursuant to gas
          balancing arrangements are not included in estimated future proceeds
          (see Note 4). As of March 31, 2001 and December 31, 2000, the quantity
          of gas sold by third parties under the gas balancing arrangements was
          approximately .2 Bcf. Proceeds related to the underproduction position
          could result in additional proceeds to the Trust or reduce the
          cost-carryforward in future periods, however, the amount and timing of
          such proceeds are uncertain. In addition, other factors, including the
          credit worthiness of the counterparties should be considered in
          determining the probability and amount of future proceeds. The Ryder
          Scott estimates did not include proceeds that may be received with
          respect to the gas balance arrangements.

        - The Working Interest Owner has brought suit against a prior gas
          purchaser, seeking reimbursement of excess royalty of a portion of
          amounts paid to the Minerals Management Service (see Note 5). A
          successful outcome for the Working Interest Owner could result in
          additional proceeds to the Trust or reduce the cost-carryforward.
          However, the suit is in the early stages, and no trial date has been
          set. The amount of any recovery is presently indeterminable. The Ryder
          Scott estimates did not include proceeds, if any, from this lawsuit.

        - The reserve for future abandonment costs for the Trust's properties
          totals $4.2 million as of March 31, 2001 and December 31, 2000. This
          amount is included in the cost carryforward of $17.3 million, as of
          March 31, 2001 (see Note 8). Such costs are by their nature imprecise
          and can be expected to be revised over time due to changes in general
          and specific cost levels, government regulation, operations or
          technology. The Ryder Scott estimates did not take into account any
          changes in such costs.

        - In December 1997, the Working Interest Owner entered into a crude oil
          agreement with an oil pipeline company which included an annual
          minimum delivery volume (see Note 9). Since the agreement's inception,
          the Trust has been assessed a deficiency payment ranging from $.5
          million to $.7 million on an annual basis. There are no assurances
          that the annual minimum delivery volume will be met in the future.

                                      --5--
<PAGE>   6
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     Accordingly the estimated discounted net present value of future net
revenues should not be construed as the current market value of the estimated
oil and gas reserves, since a market value determination would include these and
other additional factors.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Trust's financial statements, which reflect the Trust's 99.9 percent
interest in the Partnership, are prepared on the cash basis of accounting for
reporting revenues and expenses. Therefore, revenues and expenses are recognized
only as cash is received or paid and the associated receivables, payables and
accrued expenses are not reflected in the accompanying financial statements.
Under accounting principles generally accepted in the United States, revenues
and expenses would be recognized on an accrual basis.

     The initial carrying amount of the Royalty represented the Working Interest
Owner's net book value applicable to the interest in the properties conveyed to
the Trust on the date of creation of the Trust. Amortization of the Royalty has
been charged directly against trust corpus using the future net revenue method.
This method provides for calculating amortization by dividing the unamortized
portion of the Royalty by estimated future net revenues from proved reserves and
applying the resulting rate to the Trust's share of royalty proceeds.

     The carrying value of the Royalty is limited to the discounted present
value (at 10 percent) of estimated future net cash flows. Any excess carrying
value is reduced and the adjustment is charged directly against trust corpus.
The carrying value of the Royalty is $0 at March 31, 2001 and 2000. The carrying
value is not necessarily indicative of the fair market value of the Royalty held
by the Trust.

3. COST CARRY-FORWARD

     As a result of the capital costs incurred in recent years, a cumulative
excess Class A cost carry-forward of $17,345,399 existed as of March 31, 2001.
The cost carry-forward is subject to and includes an interest amount at the
prime rate, which totaled $425,771 net to the Trust during the three-month
period ended March 31, 2001. This excess Class A cost carry-forward, including
the interest factor, must be recouped by the Working Interest Owner out of
future Gross Proceeds before distributions to the Unit holders can be resumed.

4. GAS BALANCING ARRANGEMENTS

     As a result of past curtailments in gas takes by the principal purchaser of
production from the Royalty Properties, certain quantities of gas have been sold
by other parties with interests in the Royalty Properties pursuant to gas
balancing arrangements. Proceeds from gas produced from the Royalty Properties
but sold by other parties pursuant to such balancing arrangements
(underproduction) are not included in Gross Proceeds for purposes of calculating
the Royalty. In the future, the Working Interest Owner will be entitled to sell
volumes equal to such underproduction or receive cash settlements. On certain of
the Royalty Properties, a cash settlement may be required, depending on future
results, due to the lack of sufficient remaining reserves from which to makeup
any underproduction. As of March 31, 2001, the unrecovered quantity of gas sold
by third parties pursuant to such gas balancing arrangements since inception of
the Trust was approximately .2 billion cubic feet (bcf), net to the Trust. Gross
Proceeds will be increased in future periods when the
                                      --6--
<PAGE>   7
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Working Interest Owner is compensated either through the sale of gas or through
cash settlements, the amount and timing of which are uncertain. In addition,
other factors, including the credit worthiness of the counter parties should be
considered in determining the probability and the amount of the future proceeds.

5. GAS CONTRACT SETTLEMENT

     The Working Interest Owner has brought suit against a prior gas purchaser,
seeking reimbursement as excess royalty of a portion of amounts paid to the
Minerals Management Service (MMS) by the Working Interest Owner to settle claims
made by the MMS for additional royalty resulting from the Working Interest
Owner's compromise of claims against the gas purchaser. The Trust's interest in
the proceeds of the gas contract settlement were included in the Trust's Gross
Proceeds and the funds paid to the MMS reduced the Trust's Gross Proceeds. The
suit is in the early stages, and no trial date has been set. The amount of any
recovery with respect to this claim is presently indeterminable. However, if the
Working Interest Owner receives any amount in this litigation, a major portion
of it will be treated as Gross Proceeds.

6. ESTABLISHMENT OF AN EXPENSE RESERVE

     Because of the decline in Royalty income, at certain times since late 1993
the Trust was unable to pay its ongoing administrative expenses. To permit the
Trust to pay its routine administrative expenses, the Trustee, in accordance
with the Trust Indenture, established an expense reserve of $2.4 million of
which $.5 million remained as of March 31, 2001. During the first three months
of 2001, $.1 million was withdrawn from the expense reserve to pay Trust
administrative expenses.

     The funding for this reserve is deposited with Chase Manhattan Bank and
invested in Chase Manhattan Bank collateralized certificates of deposit. The
average interest rate earned on these funds for the first quarter of 2001 and
2000 was 5.08 percent and 4.87 percent, respectively.

7. FEDERAL INCOME TAX MATTERS

     The Trustee reports on the basis that the Trust is a grantor trust. As a
grantor trust, the Trust will incur no federal income tax liability. In
addition, it will incur little or no federal income tax liability if its is held
to be a non-grantor trust. If the Trust was held to be taxable as a corporation,
it would have to pay tax on its net taxable income at the corporate rate.

8. RESERVE FOR FUTURE ESTIMATED ABANDONMENT COSTS

     Estimated future abandonment costs are accrued over the life of the Trust's
properties based on current laws and regulations. During the 1997 fourth quarter
an updated assessment of estimated future abandonment costs was undertaken, by
the Working Interest Owner taking into consideration current labor and equipment
costs levels and permitted abandonment practices. This assessment resulted in a
revision of estimated remaining future abandonment costs to an amount that is
approximately equal to amounts previously withheld from distributions to
Unitholders. Such costs are by their nature imprecise and can be expected to be
revised over time because of changes in general and specific cost levels,
government regulations, operation or technology. As of March 31, 2001, the
estimated remaining aggregate abandonment costs to be incurred for all

                                      --7--
<PAGE>   8
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of the Trust's properties totaled $4.2 million net to the Trust, all of which
has been withheld from distributions to Unit holders.

9. TRANSPORTATION AGREEMENT

     In December 1997 the Working Interest Owner entered into a crude oil
agreement with an oil pipeline company to deliver on a daily basis specified
quantities of crude oil from West Cameron 498. Under the terms of the agreement
the Working Interest Owner agreed to pay a transportation fee calculated at a
sliding monthly rate based upon the total average daily volumes delivered from
West Cameron 498 during the month. Should the annual minimum delivery volume not
be met a deficiency payment is assessed by the pipeline. During 2000 and 1999
the Working Interest Owner did not deliver the minimum volume under the
agreement therefore, in 2001 the pipeline company billed the Working Interest
Owner approximately $0.5 million for the 2000 deficiency. This amount is not
included in the Class A cost carry-forward of $17.3 million, as it was paid and
will be included in the Class A cost-carry forward in the second quarter of
2001. During 2000 the Working Interest Owner paid the oil pipeline company
approximately $0.7 million for the 1999 deficiency. This amount is included in
the Class A cost carry-forward. Based on 2001 projected production the minimum
delivery volumes will not be met in 2001. However should production exceed the
2001 minimum, the Working Interest Owner is entitled to receive transportation
without pay up to the cumulative prior underdelivered volumes of 1.1 million
barrels.

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

     THE INFORMATION FURNISHED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE
FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 2000, WHICH ARE CONTAINED IN ITS ANNUAL REPORT ON FORM 10-K
FOR 2000.

                                      --8--
<PAGE>   9

                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Chase Bank of Texas National Association (Trustee)
and the Unit Holders of Freeport-McMoRan Oil and Gas Royalty Trust:

     We have reviewed the accompanying statement of assets, liabilities and
trust corpus of Freeport-McMoRan Oil and Gas Royalty Trust as of March 31, 2001,
and the related statements of royalty proceeds and distributable cash and
changes in trust corpus for the three-month periods ended March 31, 2001 and
2000. These financial statements are the responsibility of the Trustee.

     We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

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

     Based on our reviews, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with the cash basis of accounting.

                                          ARTHUR ANDERSEN LLP

Houston, Texas
May 10, 2001

                                      --9--
<PAGE>   10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

     The information contained herein regarding operations and exploration and
development activities on the properties burdened by the Royalty has been
furnished by the Working Interest Owner who obtained this information from the
relevant operators. For convenience, references are made to the Notes to
Financial Statements.

     The following discussion includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although it is believed that these
forward-looking statements are based on reasonable assumptions, important
factors could cause actual results to differ materially from those in the
forward-looking statements herein, including the timing and extent of changes in
commodity prices for oil and gas, environmental risks, drilling and operating
risks, risks related to exploration and development, uncertainties about oil and
gas reserves, government regulations and other matters beyond the control of the
Trustee and the Working Interest Owner.

     Early in December 2000, the Trustee was approached by representatives of
Roberson Oil Company and IMC Global, Inc. (IMC), the Working Interest Owner,
proposing a transaction whereby a to-be-formed corporation (NewCo) would
purchase the Trust assets and the working interest from IMC. Thereafter, NewCo
would conduct an exchange offer whereby Unit holders would be offered the
opportunity to exchange, on terms and conditions established by NewCo, their
Units in the Trust for shares in NewCo. The Trustee has received a shareholder
proposal that would amend the Trust Indenture to allow the transaction to
proceed if the proposal receives the requisite vote of Unitholders. The Trustee
prepared proxy materials for a special meeting of the Unit holders expected to
be held this summer at which the Unitholders will vote on a proposal to
authorize the Trustee to conduct a sale of the Trust's Royalty for nominal
consideration in accordance with the plan described above. The preliminary proxy
materials were filed with the Securities and Exchange Commission (SEC) on April
4, 2001. The Trustee is currently waiting on comments from the SEC staff.

     Once the definitive proxy materials are filed and a Unitholders meeting is
set, if a majority of the Unit holders entitled to vote at that meeting in which
a quorum is present vote to authorize the Trustee to sell the Trust's assets to
NewCo the Trustee will do so. If the sale to NewCo is not approved, the Trustee
will proceed to conduct an auction of the Trust properties in accordance with
the existing terms of the Trust Indenture. Complete information concerning the
vote will be provided to the Unit holders in the forthcoming proxy materials.

     During the first quarter, 2001, the Class A cost carry-forward decreased by
$2.5 million, from $19.8 million at December 31, 2000 to $17.3 million at March
31, 2001. There were no proved reserve quantities and related discounted cash
flows attributable to the Trust as of December 31, 2000. Such proved reserve
estimates are based on various assumptions, many of which are subject to
uncertainties, as more fully discussed in the Trust's Annual Report on Form
10-K. These estimates do not consider changes in prices and costs subsequent to
December 31, 2000, or the possibility of additional potentially recoverable
reserves not currently classified as proved, and therefore should not be
considered to be a prediction of actual amounts to be paid to the Trustee or an
estimate of fair market value. The Working Interest Owner has advised the
Trustee that, based on an independent review of the oil and gas interests
burdened by the Royalty, the net present value of the reserves contained therein
is substantially less than the cumulative excess Class A cost

                                      --10--
<PAGE>   11

carry-forward. The information from the Working Interest Owner indicates that
the Royalty may have little or no value, based on the net present value of
reserves determined as a result of the independent review.

RESULTS OF OPERATIONS

     There were no cash distributions to Unit holders during the first three
months of 2001 or 2000. No cash distributions have been made since 1995. During
the first quarter of 2001, Gross Proceeds exceeded total costs by approximately
$2.7 million, primarily because of higher oil and gas prices received. As a
result, the Class A cost carry-forward decreased to $17.3 million net to the
Trust as of March 31, 2001. Since mid-1995, trust administrative expenses have
been paid from the expense reserve. The calculation of distributable cash for
each year follows:

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                                              -----------------------------
                                                                  2001            2000
                                                              -------------   -------------
<S>                                                           <C>             <C>
Gross Proceeds(1)...........................................   $ 4,513,079     $ 2,772,369
Total costs(2)..............................................    (1,832,264)       (740,375)
Excess Class A cost carry-forward(3)........................    (2,680,815)     (2,031,994)
                                                               -----------     -----------
Net Proceeds................................................            --              --
Percentage attributable to Royalty..........................          90.0%           90.0%
                                                               -----------     -----------
Amounts payable attributable to Royalty.....................            --              --
Percentage attributable to the Trust........................          99.9%           99.9%
                                                               -----------     -----------
Royalty Proceeds............................................            --              --
Trust administrative expenses...............................      (106,800)        (74,614)
                                                               -----------     -----------
                                                                  (106,800)        (74,614)
Interest earned.............................................         7,262          10,611
Reserve for future Trust expenses(4)........................        99,538          64,003
                                                               -----------     -----------
Distributable Cash..........................................   $        --     $        --
                                                               ===========     ===========
</TABLE>

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

(1) Represents amounts received by the Working Interest Owner during the three
    month period ended in February of such year.

(2) Total costs represent amounts accrued by the Working Interest Owner during
    the three month period in February of such year. Includes interest to the
    Working Interest Owner of $473,552 in 2001 and $518,920 in 2000.

(3) Represents Class A costs in excess of Gross Proceeds (Gross Proceeds in
    excess of Class A costs) in the applicable periods.

(4) Represents the withdrawals from the Trust administrative expense reserve
    during the respective period.

                                      --11--
<PAGE>   12

     Gross proceeds, which include gas and oil revenues, are calculated based on
amounts received by the Working Interest Owner. Operating information follows:

<TABLE>
<CAPTION>
                                                               FIRST QUARTER
                                                              ---------------
                                                               2001     2000
                                                              ------   ------
<S>                                                           <C>      <C>
Natural Gas
  Revenues (in millions)....................................  $  1.6   $  0.3
  Sales volumes (in million cubic feet).....................     291      114
  Average realization (per thousand cubic feet).............  $ 5.49   $ 2.61
Oil
  Revenues (in millions)....................................  $  2.9   $  2.5
  Sales volumes (in thousands of barrels)...................      94       92
  Average realization (per barrel)..........................  $30.69   $26.89
</TABLE>

     Oil and gas volumes for the first quarter of 2001 increased significantly
as compared to the first quarter of 2000. The increases in oil and gas volumes
coupled with the increases in average oil and gas prices resulted in a
significant increase in oil and gas revenues for the first quarter of 2001. This
is primarily due to the operator performing workovers on individual wells that
offset the field decline and increased production. Some of those workovers were
designed to increase recoveries from existing producing intervals and others
were designed to recover oil and gas from different intervals that were expected
to be productive.

     Costs consist of the following (in millions):

<TABLE>
<CAPTION>
                                                              FIRST QUARTER
                                                              -------------
                                                              2001    2000
                                                              -----   -----
<S>                                                           <C>     <C>
Lease operating expenses....................................  $ .7    $(.8)
Exploration and development costs...........................    .6     1.0
Interest....................................................    .5      .5
                                                              ----    ----
                                                              $1.8    $ .7
                                                              ====    ====
</TABLE>

     Lease operating expenses for the first quarter of 2001 increased
significantly over the 2000 period because the Working Interest Owner believed
the costs charged for High Island 552 to be excessive and has conducted an audit
of High Island Block 552 in the fourth quarter of 1999. This audit resulted in a
credit issued by the operator of $1.5 million net to the working interest owner.
This credit was issued during the first quarter of 2000.

     In December 1997 the Working Interest Owner entered into a crude oil
agreement with an oil pipeline company to deliver on a daily basis specified
quantities of crude oil from West Cameron 498. Under the terms of the agreement
the Working Interest Owner agreed to pay a transportation fee calculated at a
sliding monthly rate based upon the total average daily volumes delivered from
West Cameron 498 during the month. Should the annual minimum delivery volume not
be met a deficiency payment is assessed by the pipeline. During 1999 the Working
interest Owner did not deliver the minimum volume under the agreement therefore,
in February 2000, the pipeline company billed the Working Interest Owner
approximately $0.7 million for the 1999 deficiency. This amount was included in
the Class A cost carry-forward in 2000. During 2000 the

                                      --12--
<PAGE>   13

Working Interest Owner did not deliver the minimum volume under the agreement
therefore, in February 2001 the pipeline company billed the Working Interest
Owner approximately $0.5 million for the 2000 deficiency. This amount was paid
and will be included in the Class A cost carry-forward in the second quarter of
2001. Based on 2001 projected production the minimum delivery volumes will not
be met in 2001. However, should production exceed the 2001 minimum the Working
Interest Owner is entitled to receive transportation without pay up to the
cumulative prior undelivered volumes.

     Exploration and development costs for the first quarter relate primarily to
the payment during 2001 of invoices relating to installing additional water
handling and compression equipment and workovers performed at West Cameron Block
498.

CAPITAL RESOURCES AND LIQUIDITY

     All revenues received by the Trust, net of Trust administrative expenses
and liabilities, are distributed to the Unit holders in accordance with
provisions of the Trust Indenture. The Class A cost carry-forward, with interest
at the prime rate, must be recouped from future Gross Proceeds before any
distributions may be made to Unit holders.

     Additional exploration may be proposed by the operators of certain other
Royalty Properties. After analyzing each proposal, the Working Interest Owner
will determine whether or not to participate in additional exploratory
operations.

     There are no exploration and development costs formally budgeted for 2001,
however, the operator of the West Cameron Block 498 installed additional water
handling and compression equipment resulting in the working interest owner
incurring $0.6 million in development cost.

     The Working Interest Owner is reviewing all options relating to its
ownership interest in the remaining properties, including discussions with
several unitholders.

     As of March 31, 2001, the estimated remaining aggregate abandonment costs
to be incurred for all of the Trust's properties totaled $4.2 million net to the
Trust, all of which has been withheld from distributions to Unit holders. Such
costs are by their nature imprecise and can be expected to be revised over time
because of changes in general and specific cost levels, government regulations,
operations or technology. Any further adjustments to estimated abandonment costs
or variances to actual costs will reduce or increase future distributable cash
accordingly.

     At certain times since late 1993, the Trust has been unable to pay its
ongoing administrative expenses. To permit the Trust to pay its administrative
expenses during the time the Trust incurs a Class A cost deficit, the Trustee,
in accordance with the Trust Indenture, established a $2.4 million Trust
administrative expense reserve to pay such expenses (see Note 6 -- Establishment
of an Expense Reserve), of which $0.5 million remained at March 31, 2001.

     The Trustee may sell or dispose of its interest in the Partnership, or
permit the Partnership to sell or dispose of all or any part of the Royalty,
only as authorized by a vote of Unit holders, upon termination of the Trust and
in certain other limited circumstances. However, the Trust is directed to effect
such a sale (without any such vote) if the Trust's cash receipts for each of
three successive years are less than $3 million. The
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