<PAGE>

                                                                    EXHIBIT 13.1

DOMINION RESOURCES BLACK WARRIOR TRUST
1996 ANNUAL REPORT AND FORM 10-K
THE TRUST

Dominion Resources Black Warrior Trust (the "Trust") was formed as a Delaware
business trust pursuant to the Trust Agreement of Dominion Resources Black
Warrior Trust (the"Trust Agreement") entered into effective as of May 1, 1994 by
and among Dominion Black Warrior Basin, Inc. (the "Company"), as trustor,
Dominion Resources, Inc., as sponsor, and NationsBank of Texas, N.A., (the
"Trustee") and Mellon Bank (DE) National Association (the "Delaware Trustee"),
as trustees. The Trust owns certain overriding royalty interests (the "Royalty
Interests") burdening proved natural gas properties in the Pottsville coal
formation of the Black Warrior basin in Alabama (the "Underlying Properties").
The Royalty Interests are the only assets of the Trust other than cash and
temporary investments being held for the payment of expenses and liabilities and
for distribution to the Unitholders.

The Trust makes quarterly cash distributions to the Unitholders. The record date
for the quarterly cash distribution of the Trust is the 60th day following the
end of the calendar quarter unless such day is not a business day in which case
the record date will be the next business day. The quarterly cash distribution
is payable on or before 70 days after the end of the calendar quarter. Set forth
below are the scheduled record dates and approximate distribution dates for each
quarter of 1997 production attributable to the Trust.
<TABLE>
<CAPTION>
===============================================================
                      1997                             1998
---------------------------------------------------------------
<S>                   <C>     <C>          <C>         <C>
Record Dates          May 30  August 29    December 1  March 2
---------------------------------------------------------------
Distribution Dates    June 9  September 8  December 9  March 11
(approximate)
===============================================================
</TABLE>

UNITS OF BENEFICIAL INTEREST

The units of beneficial interest ("Units") in the Trust are listed and traded on
the New York Stock Exchange under the symbol "DOM".  The following table sets
forth, for the periods indicated, the high and low sales prices per Unit on the
New York Stock Exchange and the amount of quarterly cash distributions per Unit
paid by the Trust.
<TABLE>
<CAPTION>
======================================================================
                               Price         Price      Distribution
                               High          Low         per Unit
----------------------------------------------------------------------
1996
<S>                           <C>           <C>        <C>
----------------------------------------------------------------------
First Quarter                 $19-1/2       $17-5/8     $0.706488
----------------------------------------------------------------------
Second Quarter                 19-1/4        18-1/2      0.898614
----------------------------------------------------------------------
Third Quarter                  20-5/8        19-5/8      0.832243
----------------------------------------------------------------------
Fourth Quarter                 24            19-3/8      0.798549
----------------------------------------------------------------------
1995
----------------------------------------------------------------------
First Quarter                 $19-5/8       $17-1/4     $0.692117
----------------------------------------------------------------------
Second Quarter                 20-1/8        17-5/8      0.639559
----------------------------------------------------------------------
Third Quarter                  18-7/8        17-5/8      0.664555
----------------------------------------------------------------------
Fourth Quarter                  9-7/8        17-1/2      0.659884
======================================================================
</TABLE>

<PAGE>

At March 18, 1997, there were 7,850,000 Units outstanding and approximately 834
Unitholders of record.

SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
========================================================================================
                                YEARS ENDED        YEARS ENDED        FOR THE PERIOD
                                DECEMBER 31,       DECEMBER 31,       FROM MAY 31, 1994
                                1996               1995               (DATE OF
                                                                      INCEPTION)TO
                                                                      DECEMBER 31, 1994
----------------------------------------------------------------------------------------
<S>                             <C>                <C>                <C>
ROYALTY INCOME                  $ 26,013,428       $ 21,603,550       $  7,596,511
----------------------------------------------------------------------------------------
DISTRIBUTABLE INCOME            $ 25,423,282       $ 20,947,426       $  7,278,931
----------------------------------------------------------------------------------------
DISTRIBUTABLE INCOME PER UNIT          $3.24              $2.67       $        .93
----------------------------------------------------------------------------------------
DISTRIBUTIONS PER UNIT                 $3.24              $2.66       $        .91
----------------------------------------------------------------------------------------
TOTAL ASSETS, DECEMBER 31       $109,761,403       $125,641,485       $139,641,366
----------------------------------------------------------------------------------------
TOTAL CORPUS, DECEMBER 31       $109,562,077       $125,545,839       $139,471,673
----------------------------------------------------------------------------------------

========================================================================================
</TABLE>

TO UNITHOLDERS:

We are pleased to present the 1996 Annual Report to Unitholders of Dominion
Resources Black Warrior Trust. The report includes a copy of the Trust's annual
report on Form 10-K for the period ended December 31, 1996. The Form 10-K
contains important information concerning the creation and administration of the
Trust, and the assets of the Trust, including coal seam gas reserves
attributable to the overriding royalty interests owned by the Trust estimated as
of December 31, 1996.

The Trust was formed as a Delaware business trust under the Delaware Business
Trust Act pursuant to the Trust Agreement. The Trust was formed to acquire and
hold the Royalty Interests, which burden the Company's interest in proved
natural gas properties located in the Pottsville coal formation of the Black
Warrior Basin, Tuscaloosa County, Alabama. The Company has advised the Trustee
that all the production attributable to the Royalty Interests currently
constitutes coal seam gas that entitles the owners of such production, provided
certain requirements are met, to tax credits pursuant to Section 29 of the
Internal Revenue Code of 1986, as amended, upon the production and sale of such
gas. The Royalty Interests are the only assets of the Trust, other than cash and
temporary investments being held for the payment of expenses and liabilities and
for distributions to Unitholders.

Royalty income to the Trust is attributable to the sale of depleting assets. All
of the Underlying Properties burdened by the Royalty Interests consist of
producing properties. Accordingly, the proved reserves attributable to the
Company's interest in the Underlying Properties are expected to decline
substantially during the term of the Trust and a portion of each cash
distribution made by the Trust will, therefore, be analogous to a return of
capital. Accordingly, cash yields attributable to the Units are expected to
decline over the term of the Trust.

On June 28, 1994, the Royalty Interests were conveyed by the Company to the
Trust in consideration for all 7,850,000 authorized Units. The Company
transferred all the Units to its parent, Dominion Energy, Inc., which in turn
transferred all the Units to its parent, Dominion Resources, Inc., which sold an
aggregate of 6,904,000 Units to the public through various underwriters in June,
1994 and August, 1994, and the remaining 946,000 Units were sold in an
underwritten public offering in June 1995.
<PAGE>

Under the Trust Agreement, the Trustee has the function of collecting proceeds
attributable to the Royalty Interests and making quarterly cash distributions to
Unitholders after deducting administrative expenses and any amounts necessary
for cash reserves. The quarterly record date is the close of business on the
60th day following the end of the calendar quarter, unless such day is not a
business day. The quarterly distribution date is on or prior to 70 days after
the end of the calendar quarter.

On or before March 15 of each year, the Trustee distributes to Unitholders of
record on any of the quarterly record dates during the prior year, information
relating to distributions, estimated Section 29 tax credits and cost depletion
deductions for such prior year. Individualized tax information prepared
specifically for the Unitholder was included with the 1996 tax information
booklet if (i) the Unitholder held its Units of record in its own name or (ii)
the Unitholder's brokerage firm or other nominee record holder had made the
beneficial owner's name and address available to the Trustee as the actual
beneficial owner of the Units in a timely manner. Assuming the amount of the
Section 29 tax credit for 1996 (which will not be announced by the U.S. Treasury
department before the end of March) is not materially different from the
Trustee's estimate, the Trustee will provide any other information to
Unitholders for filing their annual income tax returns.

DOMINION RESOURCES BLACK WARRIOR TRUST
BY: NATIONSBANK OF TEXAS, N.A., TRUSTEE
BY:/SIG/RON E. HOOPER
Vice President
March 31, 1997
TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION

The Trust collects the proceeds attributable to the Royalty Interests and makes
quarterly cash distributions to Unitholders. The only assets of the Trust, other
than cash and cash equivalents being held for the payment of expenses and
liabilities and for distribution to Unitholders, are the Royalty Interests. The
Royalty Interests owned by the Trust burden the interest in the Underlying
Properties that is owned by the Company.

The Royalty Interests consists of overriding royalty interests burdening the
Company's interest in the Underlying Properties. The Royalty Interests generally
entitle the Trust to receive 65 percent of the Gross Proceeds (as defined below)
during the preceding calendar quarter. The Royalty Interests are non-operating
interests and bear only expenses related to property, production and related
taxes (including severance taxes). "Gross Proceeds" consist generally of the
aggregate amounts received by the Company attributable to the interests of the
Company in the Underlying Properties from the sale of coal seam gas at the
central delivery points in the gathering system for the Underlying Properties.

Distributable income of the Trust consists of the excess of royalty income plus
interest income over the organizational and administrative expenses of the
Trust. Upon receipt by the Trust, royalty income is invested in short-term
investments in accordance with the Trust Agreement until its subsequent
distribution to Unitholders.

The amount of distributable income of the Trust for any calendar year may differ
from the amount of cash available for distribution to the Unitholders in such
year due to differences in the treatment of the expenses of the Trust and the
determination of those amounts. The financial statements of the Trust are
prepared on a modified cash basis pursuant to which the expenses of the Trust
are recognized when they are paid or reserves are established for them.
Consequently, the reported distributable income of the Trust for any year is
determined by deducting form the income received by the Trust the amount of
expenses paid by the Trust during such year. The amount of cash available for
<PAGE>

distribution to Unitholders, is determined after adjustment for changes in
reserves for unpaid liabilities in accordance with the provisions of the Trust
Agreement. (See Note 5 to the financial statements of the Trust appearing
elsewhere in this Annual Report to Unitholders for additional information
regarding the determination of the amount of cash available for distribution to
Unitholders.)

The year 1996 marked the second full year of operations for the Trust. Because
the Trust was effective as of May 31, 1994, royalty income for 1994 reflect only
four months of production, whereas 1996 and 1995 reflect a full year of
production. The Trust received royalty income amounting to $26,013,428 during
the year ended December 31, 1996 compared to $21,603,550 for 1995 and $7,596,511
during the period from May 31, 1994 (date of inception) to December 31, 1994.
The royalty income received by the Trust was net of the Royalty Interest's
allocable share of property, production and related taxes. Administrative
expenses during the year ended December 31, 1996 were $656,019 compared to
$713,898 for 1995 and $335,134 for the period from May 31, 1994 to December 31,
1994. Distributable income for the year ended December 31, 1996 was $25,423,282
or $3.24 per Unit compared to $20,947,426 or $2.67 for 1995 and $7,278,931, or
$.93 per Unit for the period from May 31, 1994 to December 31, 1994. .

Royalty income to the Trust is attributable to the sale of depleting assets. All
of the Underlying Properties burdened by the Royalty Interests consist of
producing properties. Accordingly, the proved reserves attributable to the
Company's interest in the Underlying Properties are expected to decline
substantially during the term of the Trust and a portion of each cash
distribution made by the Trust will, therefore, be analogous to a return of
capital. Accordingly, cash yields attributable to the Units are expected to
decline over the term of the Trust.

Royalty Income received by the Trust in a given calendar year will generally
reflect the proceeds from the sale of gas produced from the Underlying
Properties during the first three quarters of that year and the fourth quarter
of the preceding calendar year due to the timing of the receipt of these
revenues. The conveyance of the Royalty Interests to the Trust was effective
June 1, 1994. Accordingly, the royalty income included in distributable income
for the years ended December 31, 1996 and 1995, was based on production volumes
and natural gas prices for the periods from October 1, 1995 through September
30, 1996, and October 1, 1994 to September 30, 1995, respectively, and royalty
income included in distributable income for the period ended December 31, 1994,
was based on production volumes and natural gas prices for the period from June
1, 1994 to September 30, 1994.

The following table sets forth the production volumes attributable to the
Trust's Royalty Interests and the average sales Price and Index Price for such
production for the periods indicated.

<TABLE>
<CAPTION>
===========================================================================
                                 FOR 12         For 12         For 4
                                 MONTHS         Months         Months
                                 ENDED          Ended          Ended
                                 9/30/1996      9/30/1995      9/30/1994
---------------------------------------------------------------------------
<S>                              <C>            <C>            <C>
Production (Bcf)(1)              12.031         12.622         4.382
---------------------------------------------------------------------------
Production (MMBtu)(2)            11.907         12.488         4.332
---------------------------------------------------------------------------
Average
---------------------------------------------------------------------------
  Contract Price
---------------------------------------------------------------------------
  Received ($/MMBtu).            $ 2.31         $ 1.83         $ 1.86
---------------------------------------------------------------------------
Average Index Price ($/MMBtu)    $ 2.18         $ 1.52         $ 1.69
===========================================================================
</TABLE>
<PAGE>

(1)Billion cubic feet of natural gas.
(2)Trillion British Thermal Units.

The information in this Annual Report to Unitholders concerning production and
prices relating to the Royalty Interests is based on information prepared and
furnished by the Company to the Trustee. The Trustee has no control over and no
responsibility relating to the operation of or accounting for the Underlying
Properties.

Sonat Marketing Company ("Sonat Marketing") is required under a gas purchase
agreement to purchase the gas produced from the Underlying Properties for as
long as reserves on the Underlying Properties produce natural gas. Under the
agreement, Sonat Marketing is obligated to purchase up to a specified monthly
base quantity of gas for a contract price which provides for a specified premium
(between $.05 and $.07 per MMBtu) over the Index Price (as defined below),
subject to a minimum price of $1.85 per MMBtu and a maximum price of $2.63 per
MMBtu, until December 31, 1998. Although the primary term of the Gas Purchase
Agreement extends through December 31, 2001, the Minimum Price and the Maximum
Price will cease to apply after December 31, 1998. Prior to April 1, 1996, Sonat
Marketing was obligated to purchase gas production in excess of the specified
monthly base quantities at the Index Price. Effective April 1, 1996, the price
payable for such excess gas production will equal the Index Price plus $.02.
After December 31, 2001, assuming the Gas Purchase Contract is extended Sonat
Marketing is obligated to purchase gas production at the Index Price until such
time as the Company and Sonat Marketing negotiate a different price. However,
the Company will have the ability to obtain an offer from another purchaser and
terminate the gas purchase agreement if Sonat Marketing does not match such
offer. The "Index Price", which is determined on a monthly basis, is Southern
Natural Gas Company's posted index price for deliveries of gas in Louisiana.

The net proved reserves attributable to the Royalty Interests have been
estimated as of December 31, 1996, 1995 and 1994, by independent petroleum
engineers. The reserve quantities of 82.388 Bcf for 1996 compared to 74.841 Bcf
for 1995 and 63.148 Bcf for 1994 reflect an upward revision of reserves of
24.130 Bcf as a result of stronger production and advanced Pratt recompletions
(see Note 8).

This Annual Report and the accompanying Form 10-K include "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, which are intended to be covered by the safe harbor created thereby.  All
statements other than statements of historical fact included in this Annual
Report and the accompanying Form 10-K are forward-looking statements.  Such
statements include, without limitation, the reserve information and other
statements contained in Item 2, "Properties" of the accompanying Form 10-K.
Although the Trust believes that the expectations reflected in such
forward-looking statements are reasonable, such expectations are subject to
numerous risks and uncertainties and the Trust can give no assurance that they
will prove correct.  There are many factors, none of which is within the Trust's
control, that may cause such expectations not to be realized, including, among
other things, factors identified in this Annual Report and the accompanying Form
10-K affecting oil and gas prices and the recoverability of reserves, and future
economic, competitive and market conditions.

FINANCIAL STATEMENTS

An audited Statement of Assets, Liabilities and Trust Corpus of the Trust as of
December 31, 1996 and 1995, and the related Statements of Distributable Income
and Changes in Trust Corpus for the years ended December 31, 1996 and 1995 and
the period from May 31, 1994 (date of inception) to December 31, 1994, are
included in this Annual Report to Unitholders immediately following the
Independent Auditors' Report below.
<PAGE>

INDEPENDENT AUDITORS' REPORT
NATIONSBANK OF TEXAS, N.A., AS TRUSTEE OF
DOMINION RESOURCES BLACK WARRIOR TRUST

We have audited the accompanying statements of assets, liabilities and trust
corpus of Dominion Resources Black Warrior Trust (the "Trust") as of December
31, 1996 and 1995, and the related statements of distributable income and
changes in trust corpus for the years ended December 31, 1996 and 1995 and for
the period from May 31, 1994 (date of inception) to December 31, 1994. 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 generally accepted auditing
standards. 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
management, 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 statements were
prepared on a modified cash basis of accounting, which is a comprehensive basis
of accounting other than generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities and trust corpus of Dominion
Resources Black Warrior Trust at December 31, 1996 and 1995, and its
distributable income and changes in trust corpus for the years ended December
31, 1996 and 1995 and for the period from May 31, 1994 (date of inception) to
December 31, 1994, on the basis of accounting described in Note 2.

DELOITTE & TOUCHE LLP
Dallas, Texas
March 21, 1997
DOMINION RESOURCES BLACK WARRIOR TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
<TABLE>
<CAPTION>
==============================================================================
December 31                                    1996               1995
------------------------------------------------------------------------------
<S>                                            <C>                <C>
ASSETS
------------------------------------------------------------------------------
Cash and cash equivalents                      $149,707           24,521
------------------------------------------------------------------------------
Royalty interests in gas properties            109,611,696        125,616,964
(less accumulated amortization of
$46,205,805 and $30,200,537)
------------------------------------------------------------------------------
       TOTAL ASSETS                            $109,761,403       $125,641,485
------------------------------------------------------------------------------
LIABILITIES AND TRUST CORPUS
------------------------------------------------------------------------------
Trust administration expenses payable          $199,326           $95,646
------------------------------------------------------------------------------
Trust corpus (7,850,000 units of               109,562,077        125,545,839
beneficial interest authorized, issued
and outstanding
------------------------------------------------------------------------------
TOTAL LIABILITIES AND TRUST CORPUS             $109,761,403       $125,641,485
==============================================================================
</TABLE>

STATEMENTS OF DISTRIBUTABLE INCOME
<PAGE>

<TABLE>
<CAPTION>
===============================================================================================
                                          FOR YEAR            FOR YEAR        FOR THE PERIOD
                                          ENDED               ENDED           FROM MAY 31, 1994
                                          DECEMBER 31,        DECEMBER 31,    (DATE OF
                                          1996                1995            INCEPTION) TO
                                                                              DECEMBER 31, 1994
-----------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>             <C>
ROYALTY INCOME                            $26,013,428        $21,603,550      $7,596,511
-----------------------------------------------------------------------------------------------
INTEREST INCOME                           65,873              57,774          17,554
-----------------------------------------------------------------------------------------------
                                          26,079,301          21,661,324      7,614,065
-----------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES       656,019             713,898         335,134
-----------------------------------------------------------------------------------------------
DISTRIBUTABLE INCOME                      $25,423,282        $20,947,426      $7,278,931
-----------------------------------------------------------------------------------------------
DISTRIBUTABLE INCOME PER UNIT             $3.24               $2.67           $.93
(7,850,000 UNITS)
-----------------------------------------------------------------------------------------------
Distributions per unit                    $3.24               $2.66           $.91
===============================================================================================
</TABLE>


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

===============================================================================================
                                          FOR YEAR            FOR YEAR        FOR THE PERIOD
                                          ENDED               ENDED           FROM MAY 31, 1994
                                          DECEMBER 31,        DECEMBER 31,    (DATE OF
                                          1996                1995            INCEPTION) TO
                                                                              DECEMBER 31, 1994
-----------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>             <C>
TRUST CORPUS, BEGINNING OF PERIOD         $125,545,839        $139,471,673    $1,000
-----------------------------------------------------------------------------------------------
CONVEYANCE OF ROYALTY INTERESTS BY        ------              ------          148,824,287
DOMINION  RESOURCES BLACK WARRIOR
BASIN, INC
-----------------------------------------------------------------------------------------------
SALE OF 946,000 UNITS BY DOMINION         ------              6,993,213       ------
RESOURCES, INC
-----------------------------------------------------------------------------------------------
AMORTIZATION OF ROYALTY INTERESTS         (16,005,268)        (21,015,965)    (9,184,572)
-----------------------------------------------------------------------------------------------
DISTRIBUTABLE INCOME                      25,423,282          20,947,426      7,278,931
-----------------------------------------------------------------------------------------------
Trust formation costs                     ------              ------          (331,656)
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS............  (25,401,776)        (20,850,508)    (7,116,317)
-----------------------------------------------------------------------------------------------
TRUST CORPUS, END OF PERIOD               $109,562,077        $125,545,839    $139,471,673
===============================================================================================
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
1. TRUST ORGANIZATION AND PROVISIONS

Dominion Resources Black Warrior Trust (the "Trust") was formed as a Delaware
business trust pursuant to the terms of the Trust Agreement of Dominion
Resources Black Warrior Trust (as amended, the "Trust Agreement"), entered
<PAGE>

into effective as of May 31, 1994, among Dominion Black Warrior Basin, Inc., an
Alabama corporation (the "Company"), as trustor, Dominion Resources, Inc., a
Virginia corporation ("Dominion Resources"), and NationsBank of Texas, N.A., a
national banking association (the "Trustee"),and Mellon Bank (DE) National
Association, a national banking association (the "Delaware Trustee"), as
trustees. The trustees are independent financial institutions.

The Trust is a grantor trust formed to acquire and hold certain overriding
royalty interests (the "Royalty Interests") burdening proved natural gas
properties located in Pottsville coal formation of the Black Warrior Basin,
Tuscaloosa County, Alabama (the "Underlying Properties") owned by the Company.
The Trust was initially created by the filing of its Certificate of Trust with
the Delaware Secretary of State on May 31, 1994. In accordance with the Trust
Agreement, the Company contributed $1,000 as the initial corpus of the Trust. On
June 28, 1994, the Royalty Interests were conveyed to the Trust by the Company
pursuant to the Overriding Royalty Conveyance (the "Conveyance") effective as of
June 1, 1994, from the Company to the Trust, in consideration for all the
7,850,000 authorized units of beneficial interest ("Units") in the Trust. The
Company transferred all the Units to its parent, Dominion Energy, Inc., a
Virginia corporation, which in turn transferred all the Units to its parent,
Dominion Resources, Inc., which sold an aggregate of 6,904,000 Units to the
public through various underwriters (the "Underwriters") in June and August 1994
and the remaining 946,000 Units were sold to the public through certain of the
Underwriters in June 1995. All of the production attributable to the Underlying
Properties is from the Pottsville coal formation and currently constitutes coal
seam gas that entitles the owners of such production, provided certain
requirements are met, tax credits pursuant to Section 29 of the Internal Revenue
Code of 1986, as amended, upon the production and sale of such gas.

The Trustee has all powers to collect and distribute proceeds received by the
Trust and to pay Trust liabilities and expenses. The Delaware Trustee has only
such powers as are set forth in the Trust Agreement or are required by law and
is not empowered to otherwise manage or take part in the management of the
Trust. The Royalty Interests are passive in nature and neither the  Trustee nor
the Delaware Trustee has any control over, or any responsibility relating to,
the operation of the Underlying Properties or the Company's interest therein.

The Trust is subject to termination under certain circumstances described in the
Trust Agreement. Upon the termination of the Trust, all Trust assets will be
sold and the net proceeds therefrom distributed to Unitholders.

The only assets of the Trust, other than cash and temporary investments being
held for the payment of expenses and liabilities and for distribution to
Unitholders, are the Royalty Interests. The Royalty Interests consist of
overriding royalty interests burdening the Company's interest in the Underlying
Properties. The Royalty Interests generally entitle the Trust to receive 65
percent of the Company's Gross Proceeds (as defined below). The Royalty
Interests are non-operating interests and bear only expenses related to
property, production and related taxes (including severance taxes). "Gross
Proceeds" consist generally of the aggregate amounts received by the Company
attributable to the interests of the Company in the Underlying Properties from
the sale of coal seam gas at the central delivery points in the gathering system
for the Underlying Properties. The definitions, formulas and accounting
procedures and other terms governing the computation of the Royalty Interests
are set forth in the Conveyance.

Because of the passive nature of the Trust and the restrictions and limitations
on the powers and activities of the Trustee contained in the Trust Agreement,
the Trustee does not consider any of the officers and employees of the Trustee
to be "officers" or "executive officers" of the Trust as such terms are defined
under applicable rules and regulations adopted under the Securities Exchange Act
of 1934.
<PAGE>

2. BASIS OF ACCOUNTING

The financial statements of the Trust are prepared on a modified cash basis and
are not intended to present financial position and results of operations in
conformity with generally accepted accounting principles ("GAAP"). Preparation
of the Trust's financial statements on such basis includes the following:

 . Royalty income and interest income are recorded in the period in which amounts
are received by the Trust rather than in the month of production.
 . General and administrative expenses are recorded based on liabilities paid and
cash reserves established out of cash received.
 . Amortization of the Royalty Interests is calculated on a unit-of-production
basis and charged directly to trust corpus based upon when revenue are received.
 . Distributions to Unitholders are recorded when declared by the Trustee (see
Note 5).

The financial statements of the Trust differ from financial statements prepared
in accordance with GAAP because royalty income is not accrued in the period of
production, general and administrative expenses recorded are based on
liabilities paid and cash reserves established rather than on an accrual basis,
and amortization of the Royalty Interests is not charged against operating
results.

Dominion Resources sold an aggregate of 6,904,000 Units in the Public Offering
during 1994 at a price of $20.00 per Unit and sold the remaining 946,000 Units
to the public during 1995 through certain of the Underwriters at a price of
$18.75 per Unit. Accordingly, the statements of assets, liabilities and trust
corpus reflects 6,940,000 Units at the Public Offering price of $20.00 per Unit
and 946,000 Units at the price of $18.75 per Unit.

The net amount of royalty interest in gas properties is limited to the sum of
the future net cash flows attributable to the Trust's gas reserves at the year
end using current unescalated product prices plus the estimated Section 29
credits for federal income tax purposes. If the net cost of royalty interests in
gas properties exceeds this amount, an impairment provision will be recorded and
charged to the Trust Corpus.

USE OF ESTIMATES

The preparation of financial statements in conformity with the basis of
accounting described above requires management to make estimates and assumptions
that affect reported amounts of certain assets, liabilities, revenues and
expenses as of and for the reporting periods. Actual results may differ from
such estimates.

NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and for long-lived assets and certain identifiable intangibles to be
disposed of. SFAS No. 121 requires the review of long-lived assets and certain
identifiable intangibles for impairment. If an impairment event occurs and it is
determined that the carrying value of the asset may not be recoverable, an
impairment loss will be recognized as measured by the amount by which the
carrying amount of the assets exceeds the fair value of the asset. The Trust
adopted SFAS No. 121 effective January 1, 1996 and such adoption did not have a
material impact on the distributable income or financial position.

3. FEDERAL INCOME TAXES

The Trust is a grantor trust for Federal income tax purposes. As a grantor
trust, the Trust will not be required to pay Federal or state income taxes.
Accordingly, no provision for income taxes has been made in these financial
statements.
<PAGE>

Because the Trust will be treated as a grantor trust, and because a Unitholder
will be treated as directly owning an interest in the Royalty Interests, each
Unitholder will be taxed directly on his per Unit share of income attributable
to the Royalty Interests consistent with the Unitholder's method of accounting
and without regard to the taxable year or accounting method employed by the
Trust.

Production from coal seam gas wells drilled after December 31, 1979, and prior
to January 1, 1993, qualifies upon the sale of such production for the Federal
income tax credit for producing nonconventional fuels under Section 29 of the
Internal Revenue Code. This tax credit is calculated annually based on sales of
qualified production for each year through the year 2002. Such credit, based on
the Unitholder's pro rata share of qualifying production, may not be used to
reduce his regular tax liability (after the foreign tax credit and certain other
non-refundable credits) below his alternative minimum tax. Any part of the
Section 29 credit not allowed for any tax year solely because of this limitation
is subject to certain carryover provisions. Each Unitholder should consult their
tax advisor regarding tax consequences.

4. RELATED PARTY TRANSACTIONS

Dominion Resources provides accounting, bookkeeping and informational services
to the Trust in accordance with an Administrative Services Agreement effective
June 1, 1994. During 1996 this fee was $318,270 and will increase annually by
three percent. Aggregate fees paid by the Trust to Dominion Resources in 1996,
1995 and 1994 were $318,270, $331,844 and $175,000, respectively. Additionally,
during 1994, the Trust reimbursed Dominion Resources $331,656 for formation
costs.

Aggregate fees and expense reimbursements paid by the Trust to the trustees in
1996, 1995 and 1994 were $36,853, $30,900 and $5,000, respectively.

5. DISTRIBUTIONS TO UNITHOLDERS

The Trustee determines for each calendar quarter the amount of cash available
for distribution to Unitholders. Such amount (the "Quarterly Distribution
Amount") is an amount equal to the excess, if any, of the cash received by the
Trust attributable to production from the Royalty Interests during such quarter,
provided that such cash is received by the Trust on or before the last business
day prior to the 45th day following the end of such calendar quarter, plus the
amount of interest expected by the Trustee to be earned on such cash proceeds
during the period between the date of receipt by the Trust of such cash proceeds
and the date of payment to the Unitholders of such Quarterly Distribution
Amount, plus all other cash receipts of the Trust during such quarter (to the
extent not distributed or held for future distribution as a Special Distribution
Amount (as defined below) or included in the previous Quarterly Distribution
Amount)(which might include sales proceeds not sufficient in amount to qualify
for a special distribution as described in the next paragraph), over the
liabilities of the Trust paid during such quarter and not taken into account in
determining a prior Quarterly Distribution Amount, subject to adjustments for
changes made by the Trustee during such quarter in any cash reserves established
for the payment of contingent or future obligations of the Trust. An amount
which is not included in the Quarterly Distribution Amount for a calendar
quarter because such amount is received by the Trust after the last business day
prior to the 45th day following the end of such calendar quarter will be
included in the Quarterly Distribution Amount for the next calendar quarter. The
Quarterly Distribution Amount for each quarter will be payable to Unitholders of
record on the 60th day following the end of such calendar quarter unless such
day is not a business day in which case the record date is the next business day
thereafter. The Trustee will distribute the Quarterly Distribution Amount for
each quarter on or prior to 70 days after the end of such calendar quarter to
each person who was a Unitholder of record on the record date for such calendar
quarter.
<PAGE>

The Royalty Interests may be sold under certain circumstance and will be sold
following termination of the Trust. A special distribution will be made of
undistributed net sales proceeds and other amounts received by the Trust
aggregating in excess of $10 million (a "Special Distribution Amount"). The
record date for a Special Distribution Amount will be the 15th day following the
receipt by the Trust of amounts aggregating a Special Distribution Amount
(unless such day is not a business day, in which case the record date will be
the next business day thereafter) unless such day is within 10 days or less
prior to the record date for a Quarterly Distribution Amount, in which case the
record date for the Quarterly Distribution Amount. Distribution to Unitholders
of a Special Distribution Amount will be made no later than 15 days after the
Special Distribution Amount record date.

6. SUBSEQUENT EVENTS

Subsequent to December 31, 1996, the Trust declared and paid the following
distribution:
<TABLE>
<CAPTION>
==============================================================
Quarterly Record Date    Payment Date    Distribution per Unit
--------------------------------------------------------------
<S>                      <C>             <C>
March 3, 1997            March 11, 1997  $.844175
==============================================================
</TABLE>

The trustee has estimated the Section 29 tax credit associated with the March
11, 1997 quarterly distribution to be $.38  per unit (unaudited).

7. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth the royalty income, distributable income and
distributable income per Unit of the Trust for each quarter in the years ended
December 31, 1996 and 1995 (in thousands, except per Unit amounts):

<TABLE>
<CAPTION>
=======================================================================================
Calendar Quarter   Royalty Income   Distributable Income  Distributable Income per Unit
---------------------------------------------------------------------------------------
<S>                <C>              <C>                   <C>
1996
---------------------------------------------------------------------------------------
First              $5,719           $5,534                $.70
---------------------------------------------------------------------------------------
Second             7,253            7,063                 .90
---------------------------------------------------------------------------------------
Third              6,700            6,591                 .84
---------------------------------------------------------------------------------------
Fourth             6,341            6,235                 .80
---------------------------------------------------------------------------------------
                   $26,013          $25,423               $3.24
---------------------------------------------------------------------------------------
1995
---------------------------------------------------------------------------------------
First              $ 5,609          $5,518                $.70
---------------------------------------------------------------------------------------
Second             5,336            5,018                 .63
---------------------------------------------------------------------------------------
Third              5,364            5,225                 .67
---------------------------------------------------------------------------------------
Fourth             5,295            5,186                 .67
---------------------------------------------------------------------------------------
                   $21,604          $20,947               $2.67
=======================================================================================
</TABLE>

Selected 1996 fourth quarter data are as follows (in thousands, except per Unit
amounts):

<PAGE>

<TABLE>
===========================================================
<S>                                          <C>
Royalty income                               $6,341
-----------------------------------------------------------
Interest income                              16
-----------------------------------------------------------
General and administrative expenses          (123)
-----------------------------------------------------------
Distributable income                         $6,235
-----------------------------------------------------------
Distributable income per Unit                $.80
-----------------------------------------------------------
Distributions per Unit                       $.80
===========================================================
</TABLE>

Due to significant upward revision in estimate of reserve quantities (see Note
8) estimated amortization of royalty interests was adjusted downward by
approximately $4 million during the fourth quarter of 1996. This adjustment did
not have an impact on the Trust's distributable income.

8. SUPPLEMENTAL GAS DISCLOSURE (UNAUDITED)

The net proved reserves attributable to the Royalty Interests have been
estimated as of December 31, 1996, 1995 and 1994 by independent petroleum
engineers. A reserve estimate as of June 1, 1994 was prepared for the Trust even
though the conveyance of the Royalty Interests to the Trust did not occur until
June 28, 1994.

In accordance with Statement of Financial Accounting Standards No. 69, estimates
of proved reserves and future net cash flows from proved reserves have been
prepared using contractually guaranteed prices and end-of-period natural gas
prices, and related costs. The standardized measure of future net cash flows
from the gas reserves is calculated based on discounting such future net cash
flows at an annual rate of 10 percent. The price for December 31, 1996, 1995 and
1994 were $2.81, $2.26 per Mcf and $1.83 per Mcf, respectively, including the
effect of the Gas Purchase Agreement.

Numerous uncertainties are inherent in estimating volumes and value of proved
reserves and in projecting future production rates and timing of development
expenditures. Such reserve estimates are subject to change as additional
information becomes available. The reserves actually recovered and the timing of
production may be substantially different from the original estimates.

The reserve estimates for the Royalty Interests are based on a percentage share
of the Company's Gross Proceeds payable to the Trust of 65 percent.
<TABLE>
<CAPTION>
============================================================
                                                 MMcf
------------------------------------------------------------
<S>                                              <C>
Proved developed reserves at June 1, 1994        63,311
------------------------------------------------------------
Increase (decreases) due to:
------------------------------------------------------------
 Revisions of previous estimates                 7,480
------------------------------------------------------------
 Production                                      (7,643)
------------------------------------------------------------
Proved developed reserves at December 31, 1994   63,148
------------------------------------------------------------
Increase (decreases) due to:
------------------------------------------------------------
Revisions of previous estimates                  24,130
------------------------------------------------------------
Production                                       (12,437)
------------------------------------------------------------
Proved developed reserves at December 31,1995    74,841
------------------------------------------------------------
Increase (decrease) due to:
------------------------------------------------------------
Revisions of previous estimates                  19,484
------------------------------------------------------------
Production                                       (11,937)
------------------------------------------------------------
Proved developed reserves at December 31, 1996   82,388
============================================================
</TABLE>
All proved reserve estimates presented above at December 31, 1996, 1995 and 1994
are proved developed.
<PAGE>

Proved developed reserves, all located in the United States, for the Company
Interests are estimated quantities of coal seam gas which geological and
engineering data indicate with reasonable certainty to be recoverable in future
years from the coal formation under existing economic and operating conditions.
Proved developed reserves are proved reserves which can be expected to be
recovered through existing wells with existing equipment and operating methods.
Estimated economic quantities have been determined considering the Section 29
tax credit.

The following table sets forth the standardized measure of discounted estimated
future net cash flows from proved reserves at December 31, 1996, 1995 and 1994
relating to the Trust's Royalty Interests (thousands of dollars):
<TABLE>
<CAPTION>
===========================================================================
                                          1996       1995       1994
---------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>
Future cash inflows                       $231,734   $169,501   $112,375
---------------------------------------------------------------------------
Future taxes                              (13,904)   (10,170)   (6,515)
---------------------------------------------------------------------------
Future net cash flows.                    217,830    159,331    05,860
---------------------------------------------------------------------------
10% annual discount for estimated         (83,155)   (58,945)   (27,553)
 timing of cash flow
---------------------------------------------------------------------------
Standardized measure of discounted        $134,675   $100,386   $78,307
 future net cash flows
===========================================================================
</TABLE>

Future cash flows do not include Section 29 tax credits which in the aggregate
are estimated to be approximately $47,929,000 having a discounted present value
(assuming a 10% discount rate) of approximately $29,633,000 at December 31,
1996.

The following table sets forth the changes in the present value of estimated
future net cash flows from proved reserves during the period ended December 31,
1996, 1995 and 1994 (thousands of dollars):
<TABLE>
<CAPTION>
=================================================================
                                  1996        1995       1994
-----------------------------------------------------------------
<S>                               <C>         <C>        <C>
Balance at beginning of period    $100,386    $ 78,307   $ 95,400
-----------------------------------------------------------------
Increase (decrease) due to:
-----------------------------------------------------------------
 Royalty income, net of taxes     (27,091)    (21,714)   (13,202)
-----------------------------------------------------------------
 Changes in prices                17,516      18,974     (13,796)
-----------------------------------------------------------------
 Changes in estimated volumes     33,826      16,988     4,340
-----------------------------------------------------------------
 Accretion of discount            10,038      7,831      5,565
-----------------------------------------------------------------
Balance at December 31            $134,675    $100,386   $78,307
=================================================================
</TABLE>

Subsequent to year end, the price of gas decreased significantly. As of March
21, 1997, published natural gas prices were approximately $1.53 per MMBtu as
compared to the year end price of $2.84 per MMBtu utilized in the Trust's
calculation of its year end standardized measure of discounted future net cash
flow. The use of prices currently being received would result in a lower
standardized measure of discounted future net cash flows.

9. GAS PURCHASE AGREEMENT

Sonat Marketing Company ("Sonat Marketing") is required under a gas purchase
agreement (the "Gas Purchase Agreement") to purchase the natural gas produced
and sold from the Underlying Properties ("Gas") for as long as reserves on the
<PAGE>

Underlying Properties produce natural gas. Under the Gas Purchase Agreement,
Sonat Marketing is obligated to purchase up to a specified monthly base quantity
at the central delivery points for gas in the gathering system for the
Underlying Properties for a contract price which provides for a specified
premium (between $.05 and $.07 per MMBtu) over the Index Price (as defined
below), subject to a minimum price of $1.85 per MMbtu and a maximum price of
$2.63 per MMBtu, until December 31, 1998. Although the primary term of the Gas
Purchase Agreement extends through December 31, 2001, the minimum price and the
maximum price will cease to apply December 31, 1998. Prior to April 1, 1996,
Sonat Marketing was obligated to purchase gas production in excess of the
monthly base quantities at the Index Price. Effective April 1, 1996, the price
payable for such excess gas production will equal the Index Price plus $.02.
After December 31, 2001, Sonat Marketing, assuming the gas Purchases Agreement
is extended, will be obligated to purchase gas production at the Index Price
until such time as the Company and Sonat Marketing negotiate a different price,
although the Company will have the ability to obtain an offer from another
purchaser and terminate the Gas Purchase Agreement if Sonat Marketing does not
match such offer. The "Index Price", which is determined on a monthly basis, is
Southern Natural Gas Company's posted index price for deliveries of gas in
Louisiana. During 1996, 1995 and 1994, Sonat Marketing purchased all the gas
production attributable to the Royalty Interests.
TRUSTEE
NationsBank of Texas, N.A.
Dallas, Texas
DELAWARE TRUSTEE
Mellon Bank (DE) National Association
Wilmington, Delaware
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Service
Ridgefield Park, New Jersey
TRUST AUDITORS
Deloitte & Touche llp
Dallas, Texas
TRUST ENGINEERING CONSULTANTS
Ryder Scott Company Petroleum Engineers
TRUSTEE COUNSEL
Thompson & Knight,
A Professional Corporation
Dallas, Texas

FORM 10-K

A copy of the Form 10-K of the Trust for the period ended December 31, 1996 as
filed with the Securities and Exchange Commission has been provided with this
Annual Report to Unitholders. Additional copies of the Form 10-K will be
provided, without charge, upon written request to:

Dominion Resources Black Warrior Trust
NationsBank Of Texas, N.A., Trustee
901 Main Street, 17th Floor
Dallas, Texas 75202
DOMINION RESOURCES BLACK WARRIOR TRUST
NATIONSBANK OF TEXAS, N.A., TRUSTEE
901 MAIN STREET, 17TH FLOOR
DALLAS, TEXAS 75202
1-800-365-6548