<PAGE>   1
 
=========================================================================== 
                                   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 September 30, 1995.
 
                                       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.)

   TEXAS COMMERCE BANK NATIONAL ASSOCIATION                           77002
           CORPORATE TRUST DIVISION                                (Zip Code)
                712 MAIN STREET
                HOUSTON, TEXAS
   (Address of principal executive offices)
</TABLE>
 
       Registrant's telephone number, including area code: (713) 216-5447
 
                      ....................................
 
             (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........................................    7
  Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
     Operations......................................................................    8

Part II.  Other Information

  Item 6.  Exhibits and Reports on Form 8-K..........................................    13

Signature............................................................................    14
</TABLE>
 
                                      --2--
<PAGE>   3
 
                         PART I.  FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS.
 
                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST
             STATEMENTS OF ROYALTY PROCEEDS AND DISTRIBUTABLE CASH
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED               NINE MONTHS ENDED
                                               SEPTEMBER 30,                   SEPTEMBER 30,
                                        ---------------------------     ---------------------------
                                           1995            1994            1995            1994
                                        -----------     -----------     -----------     -----------
<S>                                     <C>             <C>             <C>             <C>
Royalty proceeds......................  $   152,202     $     5,005     $ 5,235,068     $ 2,551,586
Trust administrative expenses.........     (115,196)        (74,652)       (301,604)       (490,944)
Interest earned.......................       23,782          16,881          97,164          35,275
Reserve for future Trust expenses.....       53,870          52,766        (368,547)     (2,095,917)
                                        -----------     -----------     -----------     -----------
Distributable cash....................  $   114,658     $        --     $ 4,662,081     $        --
                                        ===========     ===========     ===========     ===========
Distributable cash per Unit...........  $   0.00765     $        --     $   0.31130     $        --
                                        ===========     ===========     ===========     ===========
Units outstanding.....................   14,975,390      14,975,390      14,975,390      14,975,390
                                        ===========     ===========     ===========     ===========
</TABLE>
 
               STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 
<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,     DECEMBER 31,
                            ASSETS                                  1995              1994
                                                                -------------     -------------
<S>                                                             <C>               <C>
                                                                 (UNAUDITED)
Cash and short-term investments...............................  $   2,460,788     $   1,977,583
Net overriding royalty interests in oil and gas properties....    189,875,741       189,875,741
Less, adjustment to recorded cost of net overriding royalty
  interests in oil and gas properties.........................    (25,431,543)      (25,431,543)
Less, accumulated amortization of net overriding royalty
  interests...................................................   (164,260,985)     (164,231,280)
                                                                -------------     -------------
          Total assets........................................  $   2,644,001     $   2,190,501
                                                                =============     =============
                 LIABILITIES AND TRUST CORPUS
Distributions payable to Unit holders.........................  $     114,658     $          --
Reserve for future Trust expenses.............................      2,346,130         1,977,583
Trust corpus (14,975,390 Units of Beneficial Interest
  authorized,
  issued and outstanding).....................................        183,213           212,918
                                                                -------------     -------------
          Total liabilities and trust corpus..................  $   2,644,001     $   2,190,501
                                                                =============     =============
</TABLE>
 
                     STATEMENTS OF CHANGES IN TRUST CORPUS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                  -----------------------------
                                                                      1995             1994
                                                                  ------------     ------------
<S>                                                               <C>              <C>
Trust corpus, beginning of year.................................  $    212,918     $    260,059
Royalty proceeds and interest earned, net of trust
  administrative expenses and reserve for future Trust
  expenses......................................................     4,662,081               --
Distributions payable to Unit holders...........................    (4,662,081)              --
Amortization of net overriding royalty interest.................       (29,705)         (47,141)
                                                                  ------------     ------------
Trust corpus, end of period.....................................  $    183,213     $    212,918
                                                                  ============     ============
</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. THE TRUST
 
     Freeport-McMoRan Oil and Gas Royalty Trust (the Trust) was created
effective September 30, 1983. On that date, Freeport-McMoRan Inc. (FTX)
transferred a net overriding royalty interest in certain offshore oil and gas
properties to a Partnership (the Partnership) 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". The Trust is
passive, with Texas Commerce Bank National Association 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.
 
2. THE ROYALTY
 
     Freeport-McMoRan Oil & Gas Company (the Working Interest Owner), a division
of FTX, presently 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).
 
3. DISTRIBUTIONS TO UNIT HOLDERS
 
     A cumulative excess Class A cost carry-forward of $476,435 as of December
31, 1994, was eliminated in February 1995 and funding of a $2.4 million Trust
administrative expense reserve (Note 6) was completed in April 1995 by means of
the settlement payment (Note 5). As a result of the capital costs associated
with the drilling on West Cameron Block 498 during the third quarter, there was
a cumulative excess Class A cost carry-forward of $422,407 as of September 30,
1995.
 
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 Adjusted 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 September 30, 1995, the
unrecovered quantity of gas sold by third parties pursuant to such gas balancing
arrangements since inception of the Trust through June 30,
 
                                      --4--
<PAGE>   5
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
1995 was approximately 1.8 billion cubic feet (bcf), net to the Trust. Adjusted
Gross Proceeds will be increased in future periods when the Working Interest
Owner is compensated either through the sale of gas or through cash settlements,
the amount and timing of which is uncertain.
 
5. GAS CONTRACT SETTLEMENT
 
     From 1986 through 1992, the Working Interest Owner entered into several gas
contract settlements with a gas purchaser related to the Royalty Properties
which involved payments of cash by the gas purchaser to the Working Interest
Owner. The Working Interest Owner included in Gross Proceeds the payments
received in connection with these settlements, net of amounts retained in a
suspense account representing settlement proceeds that were subject to possible
royalty obligations to the Minerals Management Service (the MMS). In December
1994, the Working Interest Owner entered into an agreement with the MMS relating
to these gas contract settlements, resulting in a payment by the Working
Interest Owner. After the settlement, approximately $4 million of the funds
initially retained for possible royalty obligations remained. The Working
Interest Owner informed the Trustee that it anticipated expenditures for the
development operations on the Royalty Properties in excess of $4 million and,
accordingly, proposed to retain the funds remaining in the suspense account for
use as payments of these anticipated expenditures, as sufficient funds may not
be otherwise available. The Trustee and the Working Interest Owner evaluated the
legal, tax and other issues relating to retaining such amounts for use in the
exploratory and development operations on the Royalty Properties and concluded
that the funds should be paid to the Trust. Such funds, including interest, were
included in the April 1995 Net Proceeds as a special payment resulting in a
distribution of $0.28794 per Unit.
 
6. ESTABLISHMENT OF AN EXPENSE RESERVE
 
     Because of the decline in Royalty income, at certain times since late 1993
the Trust has been unable to pay its ongoing administrative expenses. To permit
the Trust to pay its routine administrative expenses during the time the Trust
incurs a Class A cost deficit, the Trustee, in accordance with the Trust
Indenture, established an expense reserve of approximately $2.4 million to cover
approximately three years of Trust expenses. This reserve was funded with $1.9
million from a January 1994 settlement payment, $0.3 million from Royalty income
and $0.2 million from the April 1995 special payment (Note 5). Because of the
cumulative excess Class A cost carry-forward in the third quarter (Note 3),
$53,870 was withdrawn from the expense reserve to pay current Trust
administrative expenses. There will be tax consequences to the Unit holders for
such reserve as described in Note 7 below.
 
     The funding for this reserve is deposited with Texas Commerce Bank and
invested in Texas Commerce Bank collateralized certificates of deposit. The
average interest rate earned on these funds for the third quarter of 1995 was
3.8 percent.
 
7. FEDERAL INCOME TAX MATTERS
 
     Unit holders will be required to report taxable income for the Royalty
income received by the Trust and deposited to the expense reserve even if no
distributions were received by the Unit holders. The expense
 
                                      --5--
<PAGE>   6
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
reserve established for Trust administrative expenses described in Note 6 above
will give rise to future tax deductions as additional administrative expenses
are incurred and paid with funds deposited in the reserve.
 
8. RESERVE FOR FUTURE ESTIMATED ABANDONMENT COSTS
 
     The operators of the Trust properties have provided estimates of future
costs to abandon the Trust properties upon their depletion. The December 1994
estimate, net of abandonment costs incurred, totaled $13.6 million net to the
Trust, of which $13.2 million has been withheld from distributions to Unit
holders as of September 30, 1995. The actual costs to abandon the Trust
properties may vary from these estimates. Any excess will reduce future
distributions and, to the extent that actual costs are less than amounts
withheld, amounts will be added to future distributable cash.
 
                             ---------------------
 
     THE INFORMATION FURNISHED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS OF FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST FOR THE YEAR
ENDED DECEMBER 31, 1994, WHICH ARE CONTAINED IN ITS ANNUAL REPORT ON FORM 10-K
FOR 1994.
 
                                      --6--
<PAGE>   7
 
                   FREEPORT-MCMORAN OIL AND GAS ROYALTY TRUST
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Texas Commerce Bank 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 September 30,
1995, the related statements of royalty proceeds and distributable cash for the
three and nine month periods ended September 30, 1995 and 1994 and the related
statements of changes in trust corpus for the nine month periods then ended.
These financial statements are the responsibility of the Working Interest Owner.
 
     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 review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, 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.
 
     These financial statements were prepared on the cash basis of accounting,
which is a comprehensive basis of accounting other than generally accepted
accounting principles.
 
     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.
 
     We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of
Freeport-McMoRan Oil and Gas Royalty Trust as of December 31, 1994 and, in our
report dated March 3, 1995, we expressed an unqualified opinion on that
statement.
 
                                          ARTHUR ANDERSEN LLP
 
New Orleans, Louisiana,
November 6, 1995
 
                                      --7--
<PAGE>   8
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
 
     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.
 
RESULTS OF OPERATIONS
 
     Cash distributions to Unit holders for the third quarter and first nine
months of 1995 were $0.1 million, or $0.00765 per Unit, and $4.7 million, or
$0.31130 per Unit, respectively, compared with no distributions for the same
periods of 1994. The 1995 periods benefitted from reduced capital expenditures
and lower abandonment accruals (and for the nine-month 1995 period, the
settlement payment discussed below), partially offset by lower Gross Proceeds
when compared with the 1994 periods. The third-quarter 1995 cash distribution
was comprised solely of the July monthly distribution amount.
 
     Gas revenues included in third-quarter and nine-months 1995 Gross Proceeds
totaled $0.8 million and $2.9 million, respectively, compared with $1.6 million
and $5.9 million in the 1994 periods, respectively. Gas volumes decreased 36
percent to 0.4 billion cubic feet (bcf) for the third quarter of 1995 from 0.7
bcf in the 1994 period and decreased 38 percent to 1.4 bcf for the first nine
months of 1995 from 2.3 bcf in the 1994 period primarily because of normal
production declines. Gas price realizations averaged $1.94 per thousand cubic
feet (mcf) and $2.00 per mcf in the third quarter and nine month periods of
1995, respectively, compared with $2.43 and $2.52 per mcf in the 1994 periods,
respectively. The decline in average gas price realizations is due to a lower
spot market price and an increase in volumes sold in the spot market during
1995.
 
     Oil revenues included in Gross Proceeds totaled $0.4 million and $1.2
million for the third quarter and first nine months of 1995, respectively,
compared with $0.6 million and $1.7 million in the 1994 periods, respectively.
Oil volumes declined 29 percent to 25,200 barrels in the 1995 quarter from
35,600 barrels in the 1994 quarter and decreased 38 percent to 71,900 barrels in
the 1995 year-to-date period from 116,100 barrels in the 1994 period. The impact
of these decreases was partially offset by increases in the average oil price
realizations to $17.71 and $17.17 per barrel for the 1995 quarter and
year-to-date periods, respectively, from $15.98 and $14.56 per barrel in the
comparative 1994 periods.
 
     Capital costs during the third quarter and first nine months of 1995, net
to the Trust, were $0.7 million ($0.04719 per Unit) and $0.5 million ($0.03474
per Unit), respectively, compared with $1.2 million ($0.08099 per Unit) and $4
million ($0.27544 per Unit) for the 1994 periods. Third-quarter and year-to-date
1995 capital expenditures consist primarily of drilling costs for the West
Cameron Block 498 No. 4 well which was spudded in August 1995. The year-to-date
1995 period includes a credit resulting from certain previously accrued capital
expenditures being lower than originally estimated. Third-quarter 1994 capital
expenditures consist primarily of costs for the drilling of the West Cameron
Block 498 No. 2 and No. 3 wells while the year-to-date 1994 period also includes
costs associated with drilling activities at West Delta Block 34 and West
Cameron Block 65.
 
     Accruals for future estimated abandonment costs reduced Royalty proceeds by
$0.1 million ($0.00677 per Unit) and $0.4 million ($0.02431 per Unit) for the
third quarter and first nine months of 1995, respectively, compared with $0.2
million ($0.01444 per Unit) and $1.2 million ($0.08161 per Unit) in the
 
                                      --8--
<PAGE>   9
 
comparative 1994 periods, respectively. Based on current estimates, which may be
adjusted in future periods, approximately $0.4 million remains to be withheld
from future distributions to Unit holders (Note 8).
 
     Trust administrative expenses for the third quarter of 1995 increased
significantly, reflecting the cash costs for the bills received during the
quarter. However, after excluding the recovery of prior period Trust
administrative expenses as further discussed below, costs for the nine-month
period ended September 30, 1995 were slightly lower than in the 1994 period.
 
     A summary of the calculations of amounts payable pursuant to the Royalty
and amounts distributable by the Trust for the periods indicated follows:
 
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED            NINE MONTHS ENDED
                                               SEPTEMBER 30,                 SEPTEMBER 30,
                                         --------------------------    --------------------------
                                            1995           1994           1995           1994
                                         -----------    -----------    -----------    -----------
<S>                                      <C>            <C>            <C>            <C>
Gross proceeds(1)......................  $ 1,263,038    $ 2,172,405    $ 8,901,105    $10,714,101
Total costs(2).........................   (1,563,565)    (2,639,418)    (3,018,449)    (8,099,792)
Excess Class A cost (recovery)
  carry-forward, net(3)................      469,811        472,580        (60,091)       223,625
                                         -----------    -----------    -----------    -----------
Net proceeds...........................      169,284          5,567      5,822,565      2,837,934
Percent attributable to Royalty........         90.0%          90.0%          90.0%          90.0%
                                         -----------    -----------    -----------    -----------
Amounts payable attributable to
  Royalty..............................      152,356          5,010      5,240,309      2,554,141
Percent attributable to the Trust......         99.9%          99.9%          99.9%          99.9%
                                         -----------    -----------    -----------    -----------
Royalty proceeds.......................      152,202          5,005      5,235,068      2,551,586
Trust administrative expenses..........     (115,196)       (74,652)      (301,604)      (337,687)
Trust administrative expense
  recovery(4)..........................           --             --             --       (153,257)
                                         -----------    -----------    -----------    -----------
                                              37,006        (69,647)     4,933,464      2,060,642
Interest earned........................       23,782         16,881         97,164         35,275
Reserve for future Trust expenses(5)...       53,870         52,766       (368,547)    (2,095,917)
                                         -----------    -----------    -----------    -----------
Distributable cash.....................  $   114,658    $        --    $ 4,662,081    $        --
                                         ===========    ===========    ===========    ===========
</TABLE>
 
------------
 
(1) Gross proceeds for the three and nine month periods ended September 30, 1995
    and 1994, were calculated based on amounts received by the Working Interest
    Owner during the three and nine month periods ended August 31, 1995 and
    August 31, 1994, respectively.
 
(2) Total costs for the three and nine month periods ended September 30, 1995
    and 1994, represent amounts accrued by the Working Interest Owner during the
    three and nine month periods ended August 31, 1995 and August 31, 1994,
    respectively.
 
(3) Recoveries represent Class A costs incurred in a prior period and recovered
    in the current period; carry-forwards represent Class A costs incurred in
    the applicable period that remained outstanding as of the end of such
    period.
 
(4) Represents Trust administrative expenses incurred in a prior period and
    recovered during the current period.
 
(5) Represents the net amount withdrawn from or (deposited to) the Trust
    administrative expense reserve for the respective period.
 
                                      --9--
<PAGE>   10
 
     Any change in the timing of receipt of proceeds from production by the
Working Interest Owner can result in (1) wide swings in monthly distribution
amounts and (2) a delay from one quarter to the next in the cash distribution by
the Trust to the Unit holders of amounts attributable to delayed receipts.
Accordingly, the monthly distribution amount for any particular month is not
necessarily indicative of future monthly distribution amounts, which will depend
on revenues received and costs incurred.
 
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. Primarily as a result of costs associated
with exploratory drilling activity at West Cameron Block 498, discussed below,
the amount and timing of future distributions to Unit holders is presently
indeterminable.
 
     In mid-1994 exploratory drilling commenced at West Cameron Block 498 where
two wells, the No. 2 and the No. 3, were drilled and saved for future completion
and production after discovering 760 feet and 150 feet of net hydrocarbon pay,
respectively. The working interest owners of this block then participated in a
3D seismic survey to evaluate future drilling operations. After review of the
survey data and available geologic information, the No. 4 well was drilled
during the third quarter of 1995 in close proximity to the No. 2 well and
encountered net hydrocarbon pays comparable to those discovered in the No. 2
well. The No. 4 well was saved for future completion and production. On
September 19, 1995 the No. 5 well was spudded to test an unexplored separate
fault block with a proposed bottom hole location approximately 4,500 feet south
of the bottom hole location of the No. 2 discovery well. Additional wells may be
proposed depending on the results of the No. 5 well. Because of these drilling
operations, total Class A costs are expected to exceed Gross Proceeds for at
least several months, resulting in no distributions to the Unit holders. Future
exploration and development costs incurred with respect to this property would
also reduce net proceeds, which would reduce or eliminate distributions to Unit
holders for a presently indeterminate period. As of September 30, 1995, costs
associated with the exploration activities at West Cameron Block 498 resulted in
a cumulative cost carry-forward of $422,407, net to the Trust.
 
     The map on page 12 shows the locations and selected information for all of
the productive Royalty Properties where production or drilling operations are
currently underway. In addition to the drilling activities on West Cameron Block
498, the operators of other Royalty Properties continue to review possible
opportunities for further exploration and development activities. The operator
of Vermilion Block 58 has proposed the drilling of a test well on this block.
The proposal has been approved by the Working Interest Owner and drilling should
commence in November 1995. Additional exploration may be proposed for certain
other Royalty Properties where geologic features have been identified through
the utilization of 3D seismic technology. After analyzing each proposal, the
Working Interest Owner will determine whether or not to participate in
additional exploratory operations.
 
     The Working Interest Owner has estimated capital expenditures for the
remainder of 1995 and 1996 to be $5.5 million, net to the Trust, including $3.6
million estimated for West Cameron Block 498 and $1.1 million estimated for
exploration at Vermilion Block 58. These cost projections are based on estimates
provided by the operators of each block and may vary significantly from actual
expenditures depending on the outcome of
 
                                     --10--
<PAGE>   11
 
drilling activities and other factors affecting operations. These expenditures
would serve to reduce, and could eliminate, distributions to Unit holders for
certain periods.
 
     From 1986 through 1992, the Working Interest Owner entered into several gas
contract settlements with a gas purchaser related to the Royalty Properties
which involved payments of cash by the gas purchaser to the Working Interest
Owner. The Working Interest Owner included in Gross Proceeds the payments
received in connection with these settlements, net of amounts retained in a
suspense account representing settlement proceeds that were subject to possible
royalty obligations to the MMS. In December 1994, the Working Interest Owner
entered into an agreement with the MMS relating to these gas contract
settlements, resulting in a payment by the Working Interest Owner. After the
settlement, approximately $4 million of the funds initially retained for
possible royalty obligations remained. The Working Interest Owner informed the
Trustee that it anticipated expenditures for the development operations on the
Royalty Properties in excess of $4 million and, accordingly, proposed to retain
the funds remaining in the suspense account for use as payments of these
anticipated expenditures, as sufficient funds may not be otherwise available.
The Trustee and the Working Interest Owner evaluated the legal, tax and other
issues relating to retaining such amounts for use in the exploratory and
development operations on the Royalty Properties and concluded that the funds
should be paid to the Trust. Such funds, including interest, were included in
the April 1995 Net Proceeds as a special payment resulting in a distribution of
$0.28794 per Unit. Funds for future capital expenditures on the Royalty
Properties provided by the Working Interest Owner will subsequently reduce
distributions to Unit holders in accordance with the Trust agreements.
 
     Because of the decline in Royalty income, 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 in January 1994 a $2.4 million Trust administrative expense reserve
to pay such expenses (Note 6), which was fully funded as of July 31, 1995.
However, due to the cumulative Class A cost carry-forward (Note 3), $53,870 was
withdrawn from the expense reserve to pay current Trust administrative expenses.
 
                                     --11--
<PAGE>   12
 
[The map shows the fields offshore Louisiana and Texas identifying the location
of the Trust's productive properties by block number, including gross and net
acreage and working interest percentage for each block, as of September 30,
1995.]
 
                                     --12--
<PAGE>   13
 
                          PART II.  OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
 
  (a) Not applicable.
 
  (b) Reports on Form 8-K:
 
      No reports on Form 8-K were filed by the registrant during the third
      quarter of 1995.
 
                                     --13--
<PAGE>   14
                              INDEX TO EXHIBITS


Exhibit 27     - Financial Data Schedule