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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2018

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: 1-8424

SABINE ROYALTY TRUST

(Exact name of registrant as specified in its charter)



|                             |  |                    
|---------------------------- |  | -------------------
|Texas                        |  | 75-6297143         
|(State or other jurisdiction |  | (I.R.S. Employer   
|of incorporation or          |  | Identification No.)
|organization)                |  |                    

Simmons Bank

Park Place

2911 Turtle Creek Blvd

Suite 850

Dallas, Texas 75219

(Address of principal executive offices)

(Zip Code)

(855) 588-7839

(Registrants telephone number, including area code)

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   ☒     No   ☐

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).

Yes   ☐    
No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company,
and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer   ☐ Accelerated filer   ☒
Non-accelerated filer (Do not check if a smaller reporting company)   ☐ Smaller reporting company   ☐ Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  
☐     No   ☒

Number of units of beneficial interest outstanding at May 8, 2018: 14,579,345









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TABLE OF CONTENTS



|                                                                                            |  |  |    | 
|------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I  FINANCIAL INFORMATION                                                              |  |  |    | 
|Item 1. Financial Statements                                                                |  |  | 2  | 
|Item 
2. Trustees Discussion and Analysis of Financial Condition and Results of Operations |  |  | 12 | 
|Item 3. Quantitative and Qualitative Disclosures About Market
Risk                          |  |  | 15 | 
|Item 4. Controls and Procedures                                                             |  |  | 15 | 
|PART II  OTHER INFORMATION                                                                 |  |  |    | 
|Item 1. Legal Proceedings                                                                   |  |  | 16 | 
|Item 1A. Risk Factors                                                                       |  |  | 16 | 
|Item 6. Exhibits                                                                            |  |  | 16 | 
|SIGNATURES                                                                                  |  |  | 17 | 
|EX-31                                                                                       |  |  |    | 
|EX-32                                                                                       |  |  |    | 



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SABINE ROYALTY TRUST

PART I  FINANCIAL INFORMATION

Item 1. Financial Statements.

The condensed financial statements included herein have been prepared by Simmons Bank, as Trustee (the Trustee) of Sabine Royalty
Trust (the Trust), pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to
such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. The condensed financial statements of the Trust presented herein are unaudited. It is suggested that these
condensed financial statements and notes thereto be read in conjunction with the financial statements and notes thereto included in the Trusts latest annual report on Form 10-K. The
December 31, 2017 condensed statement of assets, liabilities and trust corpus is derived from the audited statement of assets, liabilities and trust corpus as of that date. In the opinion of the Trustee, all adjustments necessary to present
fairly the assets, liabilities and trust corpus of the Trust as of March 31, 2018, the distributable income for the three-month periods ended March 31, 2018 and 2017 and the changes in trust corpus for the three-month periods ended March 31, 2018
and 2017, have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

The condensed financial statements of March 31, 2018, and for the three-month periods ended March 31, 2018 and 2017, included herein, have
been reviewed by Weaver and Tidwell L.L.P., an independent registered public accounting firm, as stated in their report appearing herein.



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Report of Independent Registered Public Accounting Firm

Holders of Sabine Royalty Trust and

Simmons Bank, Trustee

Dallas, Texas

Results of Review of Interim Financial
Statements

We have reviewed the accompanying condensed statements of assets, liabilities and trust corpus of Sabine Royalty Trust (the
Trust) as of March 31, 2018, and the related condensed statements of distributable income and changes in trust corpus for the three-month periods ended March 31, 2018 and 2017, and the related notes (collective referred to as the
condensed interim financial statements or interim financial information). Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed interim financial statements for them to be
in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

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

Basis
for Review Results

These condensed interim financial statements are the responsibility of the Trustee. We conducted our review in accordance with
the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.



/s/ WEAVER AND TIDWELL, L.L.P.

We have served as the Trusts auditor since 2016.

Dallas,
Texas

May 8, 2018



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SABINE ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES, AND TRUST CORPUS



|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - |  | ------------------------ | - | --------- | ---------------- |  | - | --------- | 
|                                                                                                                                                   |  | Note |   |  | March 31,2018(UNAUDITED) |   |           | December 31,2017 | 
|Assets                                                                                                                                             |  |      |   |  |                          |   |           |                  |  |   |           | 
|Cash and short-term investments                                                                                                                    |  |      |   |  |                          | $ | 6,704,149 |                  |  | $ | 5,085,661 | 
|Royalty interests in oil and gas properties (less accumulated amortization of $22,158,266 and
$22,150,580 at March 31, 2018 and December 31, 2017) |  |      |   |  |                          |   | 236,919   |                  |  |   | 244,605   | 
|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 
|TOTAL                                                                                                                                              |  |      |   |  |                          | $ | 6,941,068 |                  |  | $ | 5,330,266 | 
|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 
|                                                                                                                                                   |  |      |  
|Liabilities and Trust Corpus                                                                                                                       |  |      |   |  |                          |   |           |                  |  |   |           | 
|Trust expenses payable                                                                                                                             |  |      | 4 |  |                          | $ | 234,080   |                  |  | $ | 165,041   | 
|Other payables                                                                                                                                     |  |      | 4 |  |                          |   | 1,357,449 |                  |  |   | 570,841   | 
|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 
|                                                                                                                                                   |  |      |   |  |                          |   | 1,591,529 |                  |  |   | 735,882   | 
|Contingencies                                                                                                                                      |  |      | 6 |  |                          |   |           |                  |  |   |           | 
|Trust corpus  14,579,345 units of beneficial interest authorized and outstanding                                                                  |  |      |   |  |                          |   | 5,349,539 |                  |  |   | 4,594,384 | 
|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 
|TOTAL                                                                                                                                              |  |      |   |  |                          | $ | 6,941,068 |                  |  | $ | 5,330,266 | 
|                                                                                                                                                   |  |      |   |  |                          |   |           |                  |  |   |           | 

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



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SABINE ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)



|                                                 |  |       |       |  |                             |   |            |      |  |   |            |  
|------------------------------------------------ |  | ----- | ----- |  | --------------------------- | - | ---------- | ---- |  | - | ---------- | -
|                                                 |  |       |       |  | Three Months EndedMarch 31, |  
|                                                 |  | Notes |       |  | 2018                        |   |            | 2017 | 
|Royalty Income                                   |  |       |       |  |                             | $ | 10,750,239 |      |  | $ | 10,481,493 |  
|Interest Income                                  |  |       |       |  |                             |   | 20,450     |      |  |   | 5,901      |  
|                                                 |  |       |       |  |                             |   |            |      |  |   |            |  
|Total                                            |  |       |       |  |                             |   | 10,770,689 |      |  |   | 10,487,394 |  
|General and administrative expenses              |  |       |       |  |                             |   | (838,607   | )    |  |   | (680,067   | )
|                                                 |  |       |       |  |                             |   |            |      |  |   |            |  
|Distributable Income                             |  |       |       |  |                             | $ | 9,932,082  |      |  | $ | 9,807,327  |  
|                                                 |  |       |       |  |                             |   |            |      |  |   |            |  
|Distributable Income per unit (14,579,345 units) |  |       | 1,3,5 |  |                             | $ | .68        |      |  | $ | .67        |  
|                                                 |  |       |       |  |                             |   |            |      |  |   |            |  

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



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SABINE ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)



|                                          |  |      |   |  |                             |   |            |      |  |   |            |  
|----------------------------------------- |  | ---- | - |  | --------------------------- | - | ---------- | ---- |  | - | ---------- | -
|                                          |  |      |   |  | Three Months EndedMarch 31, |  
|                                          |  | Note |   |  | 2018                        |   |            | 2017 | 
|Trust corpus, beginning of period         |  |      |   |  |                             | $ | 4,594,384  |      |  | $ | 4,423,300  |  
|Amortization of royalty interests         |  |      |   |  |                             |   | (7,686     | )    |  |   | (9,303     | )
|Distributable income                      |  |      |   |  |                             |   | 9,932,082  |      |  |   | 9,807,327  |  
|Distributions                             |  |      | 3 |  |                             |   | (9,169,241 | )    |  |   | (7,926,791 | )
|                                          |  |      |   |  |                             |   |            |      |  |   |            |  
|Trust corpus, end of period               |  |      |   |  |                             | $ | 5,349,539  |      |  | $ | 6,294,533  |  
|                                          |  |      |   |  |                             |   |            |      |  |   |            |  
|Distributions per unit (14,579,345 units) |  |      | 3 |  |                             | $ | .63        |      |  | $ | .54        |  
|                                          |  |      |   |  |                             |   |            |      |  |   |            |  

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



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SABINE ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. TRUST ORGANIZATION AND PROVISIONS

Sabine Royalty Trust (the Trust) was established by the Sabine Corporation Royalty Trust Agreement (the Trust
Agreement), made and entered into effective as of December 31, 1982, to receive a distribution from Sabine Corporation (Sabine) of royalty and mineral interests, including landowners royalties, overriding royalty
interests, minerals (other than executive rights, bonuses and delay rentals), production payments and any other similar, nonparticipatory interests, in certain producing and proved undeveloped oil and gas properties located in Florida, Louisiana,
Mississippi, New Mexico, Oklahoma and Texas (the Royalties).

Certificates evidencing units of beneficial interest (the
Units) in the Trust were mailed on December 31, 1982, to Sabines shareholders of record on December 23, 1982, on the basis of one Unit for each share of Sabines outstanding common stock. In May 1988, Sabine was
acquired by Pacific Enterprises (Pacific), a California corporation. Through a series of mergers, Sabine was merged into Pacific Enterprises Oil Company (USA) (Pacific (USA)), a California corporation and a wholly owned
subsidiary of Pacific, effective January 1, 1990. This acquisition and the subsequent mergers had no effect on the Units. Pacific (USA), as successor to Sabine, has assumed by operation of law all of Sabines rights and obligations with
respect to the Trust. The Units are listed and traded on the New York Stock Exchange.

In connection with the transfer of the Royalties to
the Trust upon its formation, Sabine had reserved to itself all executive rights, including rights to execute leases and to receive bonuses and delay rentals. In January 1993, Pacific (USA) completed the sale of substantially all its
producing oil and gas assets to a third party. The sale did not include executive rights relating to the Royalties, and Pacific (USA)s ownership of such rights was not affected by the sale.

Simmons Bank (the Trustee), acts as trustee of the Trust. Effective October 19, 2017, Simmons First National Corporation
(SFNC) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank. SFNC is the parent of Simmons Bank. SFNC merged Southwest Bank with Simmons Bank effective February 20, 2018.



| |  |  | The Trust shall not engage in any business or commercial activity of any kind or acquire assets other than those initially transferred to the Trust.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Trustee may not sell all or any part of its assets unless approved by the holders of a majority of the outstanding Units in which case the sale must be for cash and the proceeds, after satisfying all existing
liabilities, promptly distributed to Unit holders.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Trustee may establish a cash reserve for the payment of any liability that is contingent or uncertain in amount or that otherwise is not currently due or payable.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Trustee will use reasonable efforts to cause the Trust and the Unit holders to recognize income and expenses on monthly record dates.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Trustee is authorized to borrow funds to pay liabilities of the Trust provided that such borrowings are repaid in full before any further distributions are made to Unit holders.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Trustee will make monthly cash distributions to Unit holders of record on the monthly record date (see Note 3).
| | - |  | -------------------------------------------------------------------------------------------------------------------



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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.

The proceeds of production from the Royalties are
receivable from hundreds of separate payors. In order to facilitate creation of the Trust and to avoid the administrative expense and inconvenience of daily reporting to Unit holders, the conveyances by Sabine of the Royalties located in five of the
six states provided for the execution of an escrow agreement by Sabine and the initial trustee of the Trust, in its capacities as trustee of the Trust and as escrow agent. The conveyances by Sabine of the Royalties located in Louisiana provided for
the execution of a substantially identical escrow agreement by Sabine and a Louisiana bank in the capacities of escrow agent and of trustee under the name of Sabine Louisiana Royalty Trust. Sabine Louisiana Royalty Trust, the sole beneficiary of
which is the Trust, was established in order to avoid uncertainty under Louisiana law as to the legality of the Trustees holding record title to the Royalties located in Louisiana. The Trust now only has one escrow agent, which is the Trustee,
and a single escrow agreement.

Pursuant to the terms of the escrow agreement and the conveyances of the properties by Sabine, the
proceeds of production from the Royalties for each calendar month, and interest thereon, are collected by the Trustee, as escrow agent, and are paid to and received by the Trust only on the next monthly record date. The Trustee, as escrow agent, has
agreed to endeavor to assure that it incurs and pays expenses and fees for each calendar month only on the next monthly record date. The Trust Agreement also provides that the Trustee is to endeavor to assure that income of the Trust will be accrued
and received and expenses of the Trust will be incurred and paid only on each monthly record date. Assuming that the escrow agreement is recognized for federal income tax purposes and that the Trustee is able to control the timing of income and
expenses, as stated above, cash and accrual basis Unit holders should be treated as realizing income only on each monthly record date. The Trustee is treating the escrow agreement as effective for federal income tax purposes. However, for financial
reporting purposes, royalty and interest income are recorded in the calendar month in which the amounts are received by either the escrow agent or the Trust.

Distributable income as determined for financial reporting purposes for a given quarter will not usually equal the sum of distributions made
during that quarter. Distributable income for a given quarter will approximate the sum of the distributions made during the last two months of such quarter and the first month of the next quarter.



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2. ACCOUNTING POLICIES

Basis of Accounting

The
financial statements of the Trust are prepared on the following basis and are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America
(GAAP):



| |  |  | Royalty income, net of severance and ad valorem tax, and interest income are recognized in the month in which amounts are received by the Trust (see Note 1).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Trust expenses, consisting principally of routine general and administrative costs, include payments made during the accounting period. Expenses are accrued to the extent of amounts that become payable on the next
monthly record date following the end of an accounting period. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Royalties that are producing properties are amortized using the unit-of-production method. This amortization is shown as a reduction of
Trust corpus.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Distributions to Unit holders are recognized when declared by the Trustee (see Note 3).
| | - |  | ---------------------------------------------------------------------------------------

The
financial statements of the Trust differ from financial statements prepared in conformity with accounting principles generally accepted in the United States of America because of the following:



| |  |  | Royalty income is recognized in the month received rather than in the month of production.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Expenses other than those expected to be paid on the following monthly record date are not accrued.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Amortization of the Royalties is shown as a reduction to Trust corpus and not as a charge to operating results.
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Reserves may be established for contingencies that would not be recorded under accounting principles generally accepted in the United States of America.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and
Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

Use of
Estimates

The preparation of financial statements in conformity with the basis of accounting described above requires the Trustee 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.

Impairment

The Trustee
routinely reviews the Trusts royalty interests in oil and gas properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined
that the carrying value of the Trusts royalty interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the royalty interests exceeds the fair value of these assets, which
would likely be measured by discounting projected cash flows. As of March 31, 2018, no impairment is required.



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Distributable Income per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average Units outstanding. Distributable
income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic
distributable income per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

Revenue Recognition In May 2014, the FASB issued updated guidance for recognizing revenue from contracts with customers. This
update amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods and services to a customer at an amount that reflects the consideration a company
expects to receive in exchange for those goods or services. The Trust has adopted this standards update, as required, beginning with the first quarter of 2018. The adoption of this standard has not had a significant impact on its financial
statements due to the modified cash basis of reporting used by the Trust.

Federal Tax Considerations

The Internal Revenue Service has ruled that the Trust is classified as a grantor trust for federal income tax purposes and therefore is not
subject to federal income tax at the trust level. The Unit holders are considered, for federal income tax purposes, to own the Trusts income and principal as though no trust were in existence. Accordingly, no provision for federal income tax
expense has been made in these financial statements. The income of the Trust will be deemed to have been received or accrued by each Unit holder at the time such income is received or accrued by the Trust (on the applicable monthly record date) if
the escrow arrangement discussed in Note 1 to these financial statements is respected by the Internal Revenue Service. In the absence of the escrow arrangement, Unit holders would be deemed to receive or accrue income from production from the
royalty properties (and interest income) on a daily basis, in accordance with their method of accounting, as the proceeds from production and interest thereon were received or accrued by the Trust. The Trustee is treating the escrow arrangement as
effective for federal income tax purposes and furnishes tax information to Unit holders on that basis.



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State Tax Considerations

The Trust holds properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas. Unit holders should consult the
Trusts latest annual report on Form 10-K for a summary of tax matters.

Florida does not
have a personal income tax. Florida imposes an income tax on resident and nonresident corporations (except for S corporations not subject to the built-in-gains tax or
passive investment income tax), which will apply to royalty income allocable to a corporate Unit holder from properties located within Florida.

Louisiana, Mississippi, New Mexico and Oklahoma each impose income taxes applicable to both resident and nonresident individuals and/or
corporations (subject to certain exceptions for S corporations and limited liability companies, depending on their treatment for federal tax purposes), which will apply to royalty income allocable to a Unit holder from properties located within
those states. New Mexico and Oklahoma impose a withholding tax on payments to nonresidents of oil and gas proceeds derived from royalty interests. To reduce the administrative burden imposed by these rules, the Trustee has opted to allow the payors
of oil and gas proceeds to withhold on royalty payments made to the Trust. The Trust files New Mexico and Oklahoma tax returns, obtains a refund, and distributes that refund to Unit holders. Unit holders who transfer their Units before either the
New Mexico or Oklahoma tax refunds are received by the Trust or after the refunds are received but before the next Monthly Record Date will not receive any portion of the refund. As a result, such Unit holders may incur a double tax  first,
through the reduced distribution received from the Trust (as withholding at the Trust level reduces the amount of cash available for distribution) and second, by the tax payment made directly to New Mexico or Oklahoma taxing authorities with the
filing of their New Mexico or Oklahoma income tax returns.

Texas imposes a franchise tax at a rate of .75% on gross revenues less certain
deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to the Texas franchise tax generally include trusts and most other types of entities that provide limited liability protection, unless otherwise exempt.
Trusts that receive at least 90% of their federal gross income from certain passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more
than 10% of their income from operating an active trade or business generally are exempt from the Texas franchise tax as passive entities. The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive
entity. Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is a taxable entity under the Texas franchise tax generally will be required to include its portion of Trust revenues
in its own Texas franchise tax computation. This revenue is sourced to Texas under provisions of the Texas Administrative Code, sourcing such income according to the principal place of business of the Trust, which is Texas.

Each Unit holder should consult his or her tax advisor regarding state tax requirements, if any, applicable to such persons ownership of
Trust Units.

3. DISTRIBUTION TO UNIT HOLDERS

The amount to be distributed to Unit holders (Monthly Income Amount) is determined on a monthly basis. The Monthly Income Amount
is an amount equal to the sum of cash received by the Trust during a monthly period (the period commencing on the day after a monthly record date and continuing through and including the next succeeding monthly record date) attributable to the
Royalties, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves. Unit holders of record as of the monthly record date (the 15th day of
each calendar month except in limited circumstances) are entitled to have distributed to them the calculated Monthly Income Amount for such month on or before 10 business days after the monthly record date. The Monthly Income Amount per Unit is
declared by the Trust no later than 10 days prior to the monthly record date.

The cash received by the Trust from purchasers of the
Trusts oil and gas production consists of gross sales of production less applicable severance taxes.



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4. PAYABLES

Payables consist primarily of royalty receipts suspended pending verification of ownership interest or title, as well as amounts the Trustee
has reserved for payments of other expenses.

The Trustee believes that these payables represent an ordinary operating condition of the
Trust and that such payables will be paid or released in the normal course of business with the exception of amounts reserved for payment of expenses.

5. SUBSEQUENT EVENTS

Subsequent to
March 31, 2018, the Trust declared the following distributions:



|                  |  |  |  |                     |  |  |  |                |  |  |  |                       |         | 
|----------------- |  |  |  | ------------------- |  |  |  | -------------- |  |  |  | --------------------- | ------- | 
|Notification
Date |  |  |  | Monthly Record
Date |  |  |  | Payment
Date   |  |  |  | Distribution
per Unit |        
|                  |  |  |  |                     |  | 
|April 5, 2018     |  |  |  | April 16, 2018      |  |  |  | April 30, 2018 |  |  |  | $                     | .279340 | 
|                  |  |  |  |                     |  | 
|May 4, 2018       |  |  |  | May 15, 2018        |  |  |  | May 29, 2018   |  |  |  | $                     | .284380 | 

6. CONTINGENCIES

Contingencies related to the royalty properties that are unfavorably resolved would generally be reflected by the Trust as reductions to
future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders. The Trustee is not aware of any such items as of March 31, 2018.

*     *     *     *     *

Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity and Capital Resources

The
Trust makes monthly distributions to the holders of Units of the excess of the preceding months revenues received over expenses incurred. Upon receipt, royalty income is invested in short-term investments until its subsequent distribution. In
accordance with the Trust Agreement, the Trusts only long-term assets consist of royalty interests in producing and proved undeveloped oil and gas properties. Although the Trust is permitted to borrow funds if necessary to continue its
operations, borrowings are not anticipated in the foreseeable future.

Results of Operations

Distributable income consists of royalty income plus interest income plus any decrease in cash reserves established by the Trustee less
general and administrative expenses of the Trust less any increase in cash reserves established by the Trustee. Distributable income for the three months ended March 31, 2018 was $9,932,082, or $0.68 per unit. Royalty income for the three months
ended March 31, 2018 amounted to $10,750,239 while interest income was $20,450. General and administrative expenses totaled $838,607 for the three months ended March 31, 2018.

Distributions during the period were $0.227020, $0.191220, and $0.210680 per Unit payable to Unit holders of record on January 16,
February 15, and March 15, 2018, respectively.



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Royalty income for the quarter ended March 31, 2018 increased approximately $269,000 or 3%
compared with the first quarter of 2017. This increase was primarily the result of higher prices for oil ($1.2 million); along with an increase in the production of natural gas ($0.1 million). This increase was offset somewhat by a decrease in the
production of oil ($0.7 million) along with an increase in taxes and operating expenses ($0.3 million). The price of natural gas was relatively flat for the first quarter of 2018 as compared to the first quarter of 2017.

Compared to the preceding quarter ended December 31, 2017, royalty income increased approximately $1,737,000 or 19%, due mainly to an increase
in the price of oil ($1.3 million); an increase in the production of natural gas ($0.1 million) and a decrease in ad valorem taxes ($1.3 million). These increases to gross royalty income were offset somewhat by a decrease in the production of oil
($0.8 million) and an increase in other taxes and operating expenses ($0.1 million). The price of natural gas was relatively flat for the first quarter of 2018 as compared to the fourth quarter of 2017.

The following table illustrates average prices received for the periods discussed above and the related oil and gas production volume:



|              |  |                |           |  |                |   |           |                   |  |   |           | 
|------------- |  | -------------- | --------- |  | -------------- | - | --------- | ----------------- |  | - | --------- | 
|              |  | Quarter Ended  |          
|              |  | March 31,
2018 |           |  | March 31,
2017 |   |           | December 31,
2017 | 
|Production    |  |                |           |  |                |   |           |                   |  |   |           | 
|Oil (Bbls)    |  |                | 138,099   |  |                |   | 150,996   |                   |  |   | 152,994   | 
|Gas (Mcfs)    |  |                | 1,585,253 |  |                |   | 1,536,169 |                   |  |   | 1,542,024 | 
|Average Price |  |                |           |  |                |   |           |                   |  |   |           | 
|Oil (per Bbl) |  | $              | 55.00     |  |                | $ | 47.26     |                   |  | $ | 46.66     | 
|Gas (per Mcf) |  | $              | 2.78      |  |                | $ | 2.80      |                   |  | $ | 2.81      | 

Gas revenues received for the three months ended March 31, 2018, related primarily to production for October
through December 2017. The average price of gas reported by the Henry Hub for the same time period was $2.62 per Mcf. The average price of gas for the Henry Hub was $2.77 per Mcf for January through March 2018. Oil revenues for the three months
ended March 31, 2018 related primarily to production for November 2017 through January 2018. The average price of oil as reported by NYMEX for that time period was $59.43 per barrel. The average price of oil was $62.91 per barrel for January through
March 2018. As of April 23, 2018, the average price of gas for the Henry Hub was $2.50 per Mcf and the average price of oil reported by NYMEX was $67.61 per barrel. It is difficult to estimate future prices of oil and gas, and any assumptions
concerning future prices may prove to be incorrect.

Interest income for the quarter ended March 31, 2018 increased $14,500 compared with
the first quarter of 2017. Compared to the preceding quarter ended December 31, 2017, interest income increased $6,700. Changes in interest income are the result of changes in interest rates and funds available for investment.



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General and administrative expenses for the quarter ended March 31, 2018 increased by
approximately $158,500 compared to the same quarter of 2017 primarily due an increase in legal and professional services of approximately $133,000; Escrow Agent/Trustee fees of approximately $28,600; and an increase in the New York Stock Exchange
Listing fee of $5,500. These increases were offset somewhat by a decrease in printing and unitholder expenses of approximately $8,600.

Compared to the previous quarter ended December 31, 2017, general and administrative expenses increased approximately $312,500 primarily due
to an increase because of the timing of payment of legal and professional services of approximately $211,600; the increase due to the timing of payment of the New York Stock Exchange listing fee of $65,000; the increase due to the timing of the
payment of printing and unitholder services of approximately $27,600; an increase in the transfer agent fee of approximately $4,200; and an increase in the Escrow Agent/Trustee fees of approximately $4,000.

The financial statements of the Trust differ from financial statements prepared in conformity with accounting principles generally accepted in
the United States of America because of the following:



| |  |  | Royalty income is recognized in the month received rather than in the month of production.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Expenses other than those expected to be paid on the following monthly record date are not accrued.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Amortization of the Royalties is shown as a reduction to Trust corpus and not as a charge to operating results.
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Reserves may be established for contingencies that would not be recorded under accounting principles generally accepted in the United States of America.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and
Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

Critical Accounting Policies
and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation
of the Trusts financial statements is included in Item 7 of the Trusts Annual Report on Form 10-K for the year ended December 31, 2017. There have been no significant changes to the critical accounting policies during the three months
ended March 31, 2018.

Distributable Income per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average Units outstanding. Distributable
income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic
distributable income per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

Revenue Recognition In May 2014, the FASB issued updated guidance for recognizing revenue from contracts with customers. This
update amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods and services to a customer at an amount that reflects the consideration a company
expects to receive in exchange for those goods or services. The Trust has adopted this standards update, as required, beginning with the first quarter of 2018. The adoption of this standard has not had a significant impact on its financial
statements due to the modified cash basis of reporting used by the Trust.



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Forward Looking Statements

This Report includes 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 Report are forward-looking statements. Although the Trustee believes that the expectations reflected in
such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct. There are many factors, none of which is within the Trustees
control, that may cause such expectations not to be realized, including, among other things, factors identified in the Trusts most recent Annual Report on Form 10-K affecting oil and gas prices and the
recoverability of reserves, general economic conditions, actions and policies of petroleum-producing nations and other changes in the domestic and international energy markets.

The Trust has an Internet website and has made available its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act at
http://www.sbr-sabine.com as soon as reasonably practicable after such information is electronically filed with or furnished to the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Trust invests in no derivative financial
instruments, and has no foreign operations or long-term debt instruments. Other than the Trusts ability to periodically borrow money as necessary to pay expenses, liabilities and obligations of the Trust that cannot be paid out of cash held by
the Trust, the Trust is prohibited from engaging in borrowing transactions. The amount of any such borrowings is unlikely to be material to the Trust. The Trust periodically holds short-term investments acquired with funds held by the Trust pending
distribution to Unit holders and funds held in reserve for the payment of Trust expenses and liabilities. Because of the short-term nature of these borrowings and investments and certain limitations upon the types of such investments which may be
held by the Trust, the Trustee believes that the Trust is not subject to any material interest rate risk.

Item 4.
Controls and Procedures.

As of the end of the period covered by this report, the Trustee carried out an evaluation of the
effectiveness of the design and operation of the Trusts disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that
evaluation, the Trustee concluded that the Trusts disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Trust in the reports that it
files or submits under the Securities Exchange Act of 1934 and are effective in ensuring that information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and
communicated to the Trustee to allow timely decisions regarding required disclosure. There has not been any change in the Trusts internal control over financial reporting during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Trusts internal control over financial reporting.

On May 14, 2013, the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) issued an updated version of its Internal Control  Integrated Framework (the 2013 Framework). Originally, issued in 1992 (the 1992
Framework), the framework helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. The Trustee has transitioned fully to the Internal Control  Integrated
Framework 2013 and is utilizing this framework in its evaluation of the Trusts internal control over financial reporting.



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##### Table of Contents

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes in the risk factors disclosed under Part I, Item 1A of the Trusts Annual Report on Form 10-K for the year ended December 31, 2017.

Items 2-5 not
applicable.

Item 6. Exhibits.

Exhibit Number

and
Description



|4(a)* | Sabine Corporation Amended and Restated Royalty Trust Agreement effective as of May 22, 2014.
|----- | ---------------------------------------------------------------------------------------------



|(b)** | Sabine Corporation Louisiana Royalty Trust Agreement effective as of December 31, 1982, by and between Sabine Corporation and Hibernia National Bank in New Orleans, as trustee, and joined by InterFirst Bank Dallas,
N.A., as trustee. (P)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31 Trustee Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Trustee Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 
906 of the Sarbanes-Oxley Act of 2002







|* | Exhibit 4(a) is incorporated herein by reference to Exhibit 4(a) of the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Exhibit 4(b) is incorporated herein by reference to Exhibit 4(b) of the Registrants Annual Report on Form 10-K for the year ended December 31, 1993.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(P) | Paper exhibits.
|--- | ---------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.



SABINE ROYALTY TRUSTBy:

Simmons Bank, TrusteeBy:

/s/ Ron E. HooperRon E. HooperSVP, Royalty Trust Management


Date: May 8, 2018

(The Trust has no directors or executive officers.)



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