##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    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 0-8677
 Tidelands Royalty Trust B
  Texas
(State or other jurisdiction
of incorporation or organization)
    
    75-6007863
(I.R.S. Employer
Identification No.)c/o The Corporate Trustee
Bank of America, N.A.
P.O. Box 830650, Dallas, Texas
(Address of principal executive offices)
    
    75283-0650
(Zip Code)
    
 o þ
 o þ
  þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ
  1,386,375
Units




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##### 



TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    4Item 1B. Unresolved Staff Comments
    
    
    6Item 2. Properties
    
    
    6Item 3. Legal Proceedings
    
    
    8Item 4. Submission of Matters to a Vote of Security Holders
    
    
    8PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    8Item 6. Selected Financial Data
    
    
    9Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    9Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    11Item 8. Financial Statements and Supplementary Data
    
    
    12Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    12Item 9A. Controls and Procedures
    
    
    12Item 9B. Other Information
    
    
    12PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    12Item 11. Executive Compensation
    
    
    13Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    13Item 13. Certain Relationships and Related Transactions
    
    
    13Item 14. Principal Accountant Fees and Services
    
    
    13PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    14SubsidiariesCertification of the Principal Accounting Officer Pursuant to Section 302Certification of Corporate Trustee Pursuant to Section 302Certification of Principal Accounting Officer Pursuant to Section 906Certification of Corporate Trustee Pursuant to Section 906




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##### Table of Contents



Part I
 
 Item 1. Business
 Organization
    The 1951 Contract
  2




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##### Table of Contents



LeaseArea
    
    Block
    
    Number
    
    Acres
    
    Decimal
    
    OperatorGalveston
    
    
    303
    
    
    4565 (1)
    
    
    5,760
    
    
    
    0.041662
    
    
    W&T Offshore Inc.Sabine Pass
    
    
    13
    
    
    3959 (1)
    
    
    3,438
    
    
    
    0.041662
    
    
    Newfield / NipponWest Cameron
    
    
    165
    
    
    758 (1)
    
    
    5,000
    
    
    
    0.041662
    
    
    Linder / DevonWest Cameron
    
    
    225
    
    
    900 (1)
    
    
    3,750
    
    
    
    0.010416
    
    
    Dominion Exploration and Production Inc.West Cameron
    
    
    262
    
    

22538 (2)
    
    
    2,500
    
    
    
    0.062500
    
    
    ChevronWest Cameron
    
    
    291
    
    
    4397 (1)
    
    
    5,000
    
    
    
    0.041662
    
    
    Newfield / DevonTotal acres
    
    
    
    
    
    
    
    
    25,448
 
 (1)
    
    The $1,500,000 production payment has been paid.(2)
    
    There are no wells on this lease.  Company
    
    2005
    
    2004
    
    2003Devon Energy Production Company
    
    
    90
    %
    
    
    80
    %
    
    
    65
    %Burlington Resources
    
    
    
    
    
    
    
    
    
    
    3
    %Dominion Exploration & Production Co
    
    
    1
    %
    
    
    
    
    
    
    2
    %Forest Oil Corp
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %W&T Offshore Inc
    
    
    6
    %
    
    
    12
    %
    
    
    12
    %Dunhill Resources
    
    
    
    
    
    
    1
    %
    
    
    12
    %Barron Petroleum Inc
    
    
    2
    %
    
    
    4
    %
    
    
    5
    %Orca Management LLC
    
    
    
    
    
    
    2
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Trust Functions
    3




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##### Table of Contents



Item 1A. Risk Factors
  Oil and natural gas prices fluctuate due to a number of factors, and lower prices will reduce net
proceeds available to Tidelands and distributions to Tidelands unitholders.
  
    
    political conditions worldwide, in particular political
disruption, war or other armed conflicts in oil producing regions;
    
    worldwide economic conditions;
    
    weather conditions;
    
    the supply and price of foreign oil and natural gas;
    
    the level of consumer demand;
    
    the price and availability of alternative fuels;
    
    the proximity to, and capacity of, transportation facilities;
and
    
    the effect of worldwide energy conservation measures.
   Operating risks for the working interest owners interests in the Royalty Area can adversely affect
distributions.
  The operators of the working interest owner are subject to extensive governmental regulation.
  4




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The Trustee, Tidelands and its unitholders do not control the operation or development of the
properties in the Royalty Area and have little influence over operation or development.
   The owner of any properties in the Royalty Area may abandon any property, terminating the related
royalty interest Tidelands may hold.
   Tidelands royalty interest can be sold and the Tidelands trust can be terminated.
  Royalty interests are depleting assets and, if the working interest owners or other operators of
the Royalty Area do not perform additional development projects, the assets may deplete faster than
expected.
  Unitholders have limited voting rights.
  Terrorism and continued geopolitical hostilities could adversely affect Tidelands distributions to
its unitholders or the market price of its units.
  5




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Important reserve and other information with respect to the particular leases subject to Tidelands
royalty interest is difficult to obtain.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 General
 Reserves Difficulty in Obtaining Certain Data
   Production
 2005
    
    
    2004
    
    
    2003Quantity of royalty oil and natural gas sold:Oil (in barrels (bbls))
    
    
    5,839
    
    
    
    8,022
    
    
    
    8,043Natural gas (in thousand cubic feet (mcf))
    
    
    263,901
    
    
    
    175,835
    
    
    
    180,196Weighted average sales price for royalty oil and natural
gas sold:Oil (per bbl) (1)
    
    $
    53.74
    
    
    $
    41.73
    
    
    $
    31.86Natural gas (per mcf) (1)(2)
    
    $
    7.76
    
    
    $
    5.92
    
    
    $
    5.44
 
 (1)
    
    The weighted average sales price is calculated from data provided by the operators.(2)
    
    The $127,234 restored contingency reserve is excluded from the 2003 computation. 6




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##### Table of Contents



Interests in Properties
 Productive Properties.
 Gross Productive Wells:Oil
    
    
    3Natural Gas
    
    
    1013Gross Leased Acres:Productive
    
    
    22,948Non-Productive
    
    
    2,50025,448
  Present Activities
    Difficulty in Obtaining Certain Data
 7




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchaser of
Equity Securities
   Bid Quotation
    
    
    DistributionsYear Ended December 31,
    
    High
    
    
    Low
    
    
    (Per Unit)2005First
quarter
    
    $
    11.90
    
    
    $
    7.50
    
    
    $
    0.39Second
quarter
    
    
    15.75
    
    
    
    9.05
    
    
    
    0.54Third
quarter
    
    
    19.50
    
    
    
    14.05
    
    
    
    0.56Fourth
quarter
    
    
    18.80
    
    
    
    12.00
    
    
    
    0.132004First
quarter
    
    $
    10.25
    
    
    $
    6.85
    
    
    $
    0.14Second
quarter
    
    
    9.50
    
    
    
    5.75
    
    
    
    0.16Third
quarter
    
    
    8.00
    
    
    
    6.10
    
    
    
    0.16Fourth
quarter
    
    
    8.25
    
    
    
    6.50
    
    
    
    0.23
     8




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Item 6. Selected Financial Data
 (In Thousands, Except Per Unit Amounts)2005
    
    2004
    
    2003
    
    2002
    
    2001Income  oil and natural gas
royalties
    
    $
    2,363
    
    
    $
    1,376
    
    
    $
    1,365
    
    
    $
    1,011
    
    
    $
    1,166Net income
    
    $
    2,241
    
    
    $
    1,264
    
    
    $
    1,271
    
    
    $
    879
    
    
    $
    1,092Net income per unit
    
    $
    1.62
    
    
    $
    .91
    
    
    $
    .92
    
    
    $
    .63
    
    
    $
    .79Distributions to
unitholders
    
    $
    2,663
    
    
    $
    954
    
    
    $
    1,349
    
    
    $
    668
    
    
    $
    1,332Distributions per
unit
    
    $
    1.92
    
    
    $
    .69
    
    
    $
    .97
    
    
    $
    .48
    
    
    $
    .96Total assets
    
    $
    1,797
    
    
    $
    1,804
    
    
    $
    1,489
    
    
    $
    1,533
    
    
    $
    1,299
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 Critical Accounting Policies
 Results of Operations
   Summary Review
 9




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For Years Ended December 31,2005
    
    2004
    
    2003Income:Oil royalties (1)
    
    $
    313,777
    
    
    $
    334,770
    
    
    $
    256,257Natural gas royalties (2)
    
    
    2,048,982
    
    
    
    1,040,881
    
    
    
    981,234$
    2,362,759
    
    
    $
    1,375,651
    
    
    $
    1,237,491Net production quantities:Oil (bbls)
    
    
    5,839
    
    
    
    8,022
    
    
    
    8,043Natural gas (mcf)
    
    
    263,901
    
    
    
    175,835
    
    
    
    180,196Average net prices:Oil (1)
    
    $
    53.74
    
    
    $
    41.73
    
    
    $
    31.86Natural gas (1)(2)
    
    $
    7.76
    
    
    $
    5.92
    
    
    $
    5.44
 
 (1)
    
    These amounts are net of the cost of transportation from offshore leases to onshore receiving
points.(2)
    
    The $127,234 restored contingency reserve is excluded from the 2003 computation.  Oil and Natural Gas Royalties  2005 and 2004.
    Oil and Natural Gas Royalties  2004 and 2003.
 10




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Capital Resources and Liquidity
   Forward-Looking Statements .
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    11




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Item 8. Financial Statements and Supplementary Data
  Page Report of Independent Registered Public Accounting Firm
    
    15 Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    16 Consolidated Statements of Income and Undistributed Income for the Three Years
Ended December 31, 2005
    
    17 Consolidated Statements of Cash Flows for the Three Years Ended December 31,
2005
    
    18 Notes to Consolidated Financial Statements
    
    19
 Exhibits and Financial Statement Schedules
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  
 Item 9B. Other Information
  
 Part III
 
 Item 10. Directors and Executive Officers of the Registrant
   12




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th
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Amount BeneficiallyName and Address of
    
    Owned as of
    
    PercentTitle of Class
    
    Beneficial Owner
    
    December 31, 2005
    
    of ClassUnits of Beneficial Interest
    
    Marine Petroleum Trust
    
    
    452,366
    
    
    
    32.6
    %P.O. Box 830241Dallas, Texas 75283-0241
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  2005
    
    2004Audit Fees
    
    $
    32,250
    
    
    $
    30,000Audit-related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    
 13




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Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Financial Statements  See Financial Statements and Supplementary Data above.(b)
    
    Exhibits
 4.1
    
    Indenture of Trust dated June 1, 1954, as amended, filed as an Exhibit to
Tidelands Quarterly Report on Form 10-Q for the period ended September 30, 2001,
filed with the Securities and Exchange Commission on November 14, 2001, and
incorporated herein by reference.21.1
    
    Subsidiaries of Tidelands Royalty Trust B.31.1
    
    Certification of the Principal Accounting Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley of
Act of 2002.32.1
    
    Certification of the Principal Accounting Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Corporate Trustee pursuant to Section 906 of the
Sarbanes-Oxley of Act of 2002.
 (c)
    
    Financial Statement Schedules  All required schedules are included in the financial statements
included in this Annual Report on Form 10-K.
 14




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Dallas, TexasMarch 30, 2006
    
    /s/ KPMG LLP
 15




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
 2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,662,154
    
    
    $
    1,206,804Oil and natural gas royalties
receivable
    
    
    134,434
    
    
    
    396,015Interest receivable
    
    
    
    
    
    
    1,403Total current assets
    
    
    1,796,588
    
    
    
    1,604,222Oil, natural gas and other mineral
properties
    
    
    2
    
    
    
    2Investment in U.S. Treasury and agency
bonds
    
    
    
    
    
    
    200,000$
    1,796,590
    
    
    $
    1,804,224Liabilities and Trust EquityCurrent liabilities:Accounts payable
    
    $
    8,699
    
    
    $
    17,984Federal income taxes payable
    
    
    1,401
    
    
    
    3,560Income distributable to unitholders
    
    
    749,343
    
    
    
    323,610Total current liabilities
    
    
    759,443
    
    
    
    345,154Trust equity:Corpus  authorized 1,386,525 units of beneficial interest,
issued 1,386,375 units at nominal value
    
    
    2
    
    
    
    2Undistributed income (note 2)
    
    
    1,037,145
    
    
    
    1,459,068Total trust equity
    
    
    1,037,147
    
    
    
    1,459,070$
    1,796,590
    
    
    $
    1,804,224
  16




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME
THREE YEARS ENDED DECEMBER 31, 2005
 2005
    
    
    2004
    
    
    2003Income:Oil and natural gas royalties
    
    $
    2,362,759
    
    
    $
    1,375,651
    
    
    $
    1,364,733Interest and other
    
    
    36,954
    
    
    
    11,916
    
    
    
    22,419Total income
    
    
    2,399,713
    
    
    
    1,387,567
    
    
    
    1,387,152Expenses:General and administrative
    
    
    140,675
    
    
    
    118,087
    
    
    
    110,384Income before federal income
taxes
    
    
    2,259,038
    
    
    
    1,269,480
    
    
    
    1,276,768Federal income taxes of subsidiary (note
1(e))
    
    
    17,553
    
    
    
    5,200
    
    
    
    5,490Net income
    
    
    2,241,485
    
    
    
    1,264,280
    
    
    
    1,271,278Undistributed income at beginning of year
    
    
    1,459,069
    
    
    
    1,148,633
    
    
    
    1,226,1793,700,554
    
    
    
    2,412,913
    
    
    
    2,497,457Distributions to unitholders
    
    
    2,663,409
    
    
    
    953,845
    
    
    
    1,348,824Undistributed income at end of year
    
    $
    1,037,145
    
    
    $
    1,459,068
    
    
    $
    1,148,633Net income per unit
    
    $
    1.62
    
    
    $
    .91
    
    
    $
    .92Distributions per unit
    
    $
    1.92
    
    
    $
    .69
    
    
    $
    .97Weighted average units outstanding
    
    
    1,386,375
    
    
    
    1,386,375
    
    
    
    1,386,375
  17




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 2005
 2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    2,241,485
    
    
    $
    1,264,280
    
    
    $
    1,271,278Adjustments to reconcile net income to net cash
provided by operating activities:Amortization of premium
    
    
    
    
    
    
    12,760
    
    
    
    15,802Loss on sale of U.S. Treasury and agency bonds
    
    
    
    
    
    
    761
    
    
    
    Change in assets and liabilities:Oil and natural gas royalties receivable
    
    
    261,581
    
    
    
    (230,250
    )
    
    
    108,499Federal income taxes receivable
    
    
    
    
    
    
    
    
    
    
    12,037Interest receivable
    
    
    1,403
    
    
    
    4,261
    
    
    
    (1,010
    )Accounts payable
    
    
    (9,285
    )
    
    
    12,852
    
    
    
    (125,901
    )Federal income tax payable
    
    
    (2,159
    )
    
    
    2,858
    
    
    
    702Net cash provided by operating activities
    
    
    2,493,025
    
    
    
    1,067,522
    
    
    
    1,281,407Cash flows used in investing activities:Investment in U.S. Treasury and agency bonds
    
    
    
    
    
    
    (201,034
    )
    
    
    (206,301
    )Proceeds from sale of U.S. agency bonds
    
    
    200,000
    
    
    
    699,549
    
    
    
    200,000Net cash provided by (used in) investing activities
    
    
    200,000
    
    
    
    498,515
    
    
    
    (6,301
    )Cash flows used in financing activities  cash
distributions to unitholders
    
    
    (2,237,675
    )
    
    
    (965,195
    )
    
    
    (1,189,519
    )Net increase (decrease) in cash and cash
equivalents
    
    
    455,350
    
    
    
    600,842
    
    
    
    85,587Cash and cash equivalents at beginning of year
    
    
    1,206,804
    
    
    
    605,962
    
    
    
    520,375Cash and cash equivalents at end of year
    
    
    1,662,154
    
    
    $
    1,206,804
    
    
    $
    605,962
  18




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005
 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
            19




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20




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
   2005
    
    2004
    
    2003Devon Energy Production Company
    
    
    90
    %
    
    
    80
    %
    
    
    65
    %W & T Offshore
    
    
    6
    %
    
    
    12
    %
    
    
    12
    %Burlington Resources Oil and Natural Gas
Company
    
    
    
    
    
    
    1
    %
    
    
    3
    %Dunhill
Resources, Inc.
    
    
    
    
    
    
    
    
    
    
    12
    %Millenium Offshore Group
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    4
    %
    
    
    7
    %
    
    
    8
    %100
    %
    
    
    100
    %
    
    
    100
    %
 (2) UNDISTRIBUTED INCOME
  (3) SUPPLEMENTAL INFORMATION RELATING TO OIL AND NATURAL GAS RESERVES (UNAUDITED)
  (4) SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
  Oil andNatural Gas
    
    Net
    
    Net IncomeRoyalties
    
    Income
    
    Per UnitQuarter ended:March 31, 2005
    
    $   578,241
    
    $   540,408
    
    $ .39June 30, 2005
    
    785,750
    
    750,893
    
    .54September 30, 2005
    
    809,535
    
    779,819
    
    .56December 31, 2005
    
    189,233
    
    170,365
    
    .13$2,362,759
    
    $2,241,485
    
    $1.62Quarter ended:March 31, 2004
    
    $   255,557
    
    $   224,418
    
    $ .16June 30, 2004
    
    194,938
    
    162,128
    
    .12September 30, 2004
    
    247,336
    
    228,036
    
    .16December 31, 2004
    
    677,820
    
    649,698
    
    .47$1,375,651
    
    $1,264,280
    
    $ .91
 21




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SIGNATURES
  Tidelands Royalty Trust BDate: March 30, 2006
    
    (Registrant)By: Bank of America, N.A.(in its capacity as Corporate Trusteeof Tidelands Royalty Trust B and not inits individual capacity or otherwise)By:

    /s/ RON E. HOOPERRon E. HooperSenior Vice President
  NAME


    
    
    
    CAPACITIES
    
    DATEBank of America, N.A.
    
    
    
    Corporate Trustee
    
    March 30, 2006By:
    
    /s/ RON E. HOOPERRon E. HooperSenior Vice President/s/ R. RAY BELL
    
    
    
    (Acting as Principal Accounting Officer)
    
    March 30, 2006R. Ray Bell
 22




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Tidelands Royalty Trust B
c/o Bank of America, N.A.
P.O. Box 830241
Dallas, Texas 75283-0241
 23




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EXHIBIT INDEX
 ExhibitNumber
    
    Description4.1
    
    Indenture of Trust dated June 1, 1954, as amended, filed as an Exhibit to Tidelands
Quarterly Report on Form 10-Q for the period ended September 30, 2001, filed with the
Securities and Exchange Commission on November 14, 2001, and incorporated herein by reference.21.1
    
    Subsidiaries of Tidelands Royalty Trust B.31.1
    
    Certification of the Principal Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley of Act of
2002.32.1
    
    Certification of the Principal Accounting Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Corporate Trustee pursuant to Section 906 of the Sarbanes-Oxley of Act
of 2002.
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