##### 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, 2008
 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 000-08677
 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 
U.S. Trust, Bank of America Private Wealth Management 
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 o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    4Item 1B.
    
    Unresolved Staff Comments
    
    
    8Item 2.
    
    Properties
    
    
    8Item 3.
    
    Legal Proceedings
    
    
    9Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    10PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    10Item 6.
    
    Selected Financial Data
    
    
    11Item 7.
    
    Trustees Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 8.
    
    Financial Statements and Supplementary Data
    
    
    17Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    17Item 9A(T).
    
    Controls and Procedures
    
    
    17Item 9B.
    
    Other Information
    
    
    18PART IIIItem 10.
    
    Directors and Executive Officers and Corporate Governance
    
    
    18Item 11.
    
    Executive Compensation
    
    
    18Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    18Item 13.
    
    Certain Relationships and Related Transactions
    
    
    19Item 14.
    
    Principal Accountant Fees and Services
    
    
    19PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    19EX-31.1EX-32.1




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Part I
 
 Item 1. Business
 Organization
     The 1951 Contract
  2




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##### Table of Contents



Area
    
    Block
    
    Lease Number
    
    Acres
    
    Royalty Interest
    
    2008 Royalties
    
    OperatorGalveston
    
    
    303
    
    
    
    4565
    
    
    
    5,760
    
    
    
    4.1662
    %
    
    $
    430,000
    
    
    W&T Offshore Inc.Sabine Pass
    
    
    13
    
    
    
    3959
    
    
    
    3,438
    
    
    
    4.1662
    %
    
    $
    375,000
    
    
    NOEX Energy, Inc.West Cameron
    
    
    165
    
    
    
    758
    
    
    
    5,000
    
    
    
    4.1662
    %
    
    $
    2,981,000
    
    
    Devon Energy Production Company LPWest Cameron
    
    
    225
    
    
    
    900
    
    
    
    3,750
    
    
    
    1.0416
    %
    
    $
    54,000
    
    
    Breton Energy LLCWest Cameron
    
    
    291
    
    
    
    4397
    
    
    
    5,000
    
    
    
    4.1662
    %
    
    $
    735,000
    
    
    Devon Energy Production Company LPTotal
    
    
    
    
    
    
    
    
    
    
    22,948
    
    
    
    
    
    
    $
    4,575,000
  Working Interest Owners
    
    2008
    
    2007
    
    2006Devon Energy Production Company LP
    
    
    77
    %
    
    
    74
    %
    
    
    59
    %NOEX Energy, Inc.
    
    
    8
    %
    
    
    7
    %
    
    
    26
    %W&T Offshore Inc.
    
    
    7
    %
    
    
    6
    %
    
    
    13
    %McMoran Oil & Gas
    
    
    4
    %
    
    
    
    
    
    
    Barron Petroleum Inc.
    
    
    3
    %
    
    
    2
    %
    
    
    2
    %ENI US Operating Co., Inc.
    
    
    1
    %
    
    
    
    
    
    
    Dominion Exploration & Production, Inc.
    
    
    
    
    
    
    1
    %
    
    
    Newfield Exploration Co.
    
    
    
    
    
    
    10
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Trust Functions
    3




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Widely Held Fixed Investment Trust Reporting Information.
 
  
 Item 1A. Risk Factors
  Tidelands is unable to acquire royalty interests in any more leases.
  Royalty interests are depleting assets and may deplete faster than expected or entirely.
   Oil and natural gas prices are volatile and fluctuate due to a number of factors, and lower prices
will reduce royalty payments to Tidelands and distributions to its unitholders.
  4




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
    
    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 domestic and 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.
   The market price for the units may not reflect the value of the royalty interests held by
Tidelands.
   Operating risks for the working interest owners interests in the Royalty Area can adversely affect
distributions.
  5




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The owner of any properties in the Royalty Area may transfer any of the properties in the Royalty
Area to another unrelated third party.
  The owner of any properties in the Royalty Area may abandon any property, terminating the related
royalty interest Tidelands may hold.
  The Trustee, Tidelands and the Trusts unitholders do not control the operation or development of
the properties in the Royalty Area and have little influence over operation or development.
  Important reserve and other information with respect to the particular leases subject to Tidelands
royalty interest is difficult to obtain.
  Terrorism and continued geopolitical hostilities could adversely affect Tidelands distributions to
its unitholders or the market price of its units.
  Unitholders have limited voting rights.
  6




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The limited liability of the unitholders is uncertain.
  Tidelands royalty interest can be sold and the Trust can be terminated.
  The operators of the working interest owner are subject to extensive governmental regulation.
  Financial information of Tidelands is not prepared in accordance with accounting principles
generally accepted in the United States, or GAAP.
  If it is determined that the Trust is subject to the Texas franchise tax, the Trustee may have to
withhold an amount from future distributions to pay the tax liability.
  i.e.
 7




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 General
 Reserves
   Production
 Year Ended December 31,2008
    
    2007
    
    2006Quantity of oil and natural gas sold:Oil (in barrels (bbls))
    
    
    4,603
    
    
    
    7,071
    
    
    
    5,789Natural gas (in thousand cubic feet (mcf))
    
    
    428,728
    
    
    
    515,260
    
    
    
    141,572Weighted average sales price for oil and natural
gas sold:Oil (per bbl) (1)
    
    $
    107.98
    
    
    $
    66.19
    
    
    $
    65.81Natural gas (per mcf) (1)
    
    $
    9.51
    
    
    $
    7.29
    
    
    $
    6.70
 
 (1)
    
    The weighted average sales price is calculated from data provided by the operators.  Interests in Properties
 8




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Productive Properties.
 Gross Productive Wells:Oil
    
    
    3Natural Gas
    
    
    17Total Wells
    
    
    20Gross Leased Acres:Productive
    
    
    22,948Non-Productive
    
    
    Total Leased Acres
    
    
    22,948
  Present Activities
     Difficulty in Obtaining Certain Data
 
 Item 3. Legal Proceedings
  9




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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 Purchases of Equity Securities
   Bid Quotation
    
    DistributionsYear Ended December 31,
    
    High
    
    Low
    
    (Per Unit)2008First quarter
    
    $
    25.24
    
    
    $
    19.00
    
    
    $
    0.69Second quarter
    
    
    29.50
    
    
    
    22.86
    
    
    
    0.63Third quarter
    
    
    29.95
    
    
    
    16.00
    
    
    
    0.76Fourth quarter
    
    
    18.90
    
    
    
    8.50
    
    
    
    0.892007First quarter
    
    $
    23.00
    
    
    $
    13.07
    
    
    $
    0.69Second quarter
    
    
    28.00
    
    
    
    20.20
    
    
    
    0.72Third quarter
    
    
    25.75
    
    
    
    16.10
    
    
    
    0.85Fourth quarter
    
    
    32.00
    
    
    
    20.58
    
    
    
    0.65
      10




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Item 6. Selected Financial Data
  Year Ended December 31,(In Thousands, Except Per Unit Amounts)2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Audited)
    
    
    (Audited
    
    
    (Audited
    
    
    (Audited
    
    
    (Unauditedand
    
    
    and
    
    
    and
    
    
    andRestated)
    
    
    Restated)
    
    
    Restated)
    
    
    Restated)Statement of Distributable Income
Selected Data:Income  oil and natural gas royalties
    
    $
    4,575
    
    
    $
    4,226
    
    
    $
    1,329
    
    
    $
    2,624
    
    
    $
    1,145Expense   General and administrative
expenses
    
    $
    326
    
    
    $
    172
    
    
    $
    136
    
    
    $
    141
    
    
    $
    118Expense   Federal income taxes of
subsidiary
    
    $
    46
    
    
    $
    52
    
    
    $
    19
    
    
    $
    18
    
    
    $
    5Distributable income
    
    $
    4,230
    
    
    $
    4,068
    
    
    $
    1,216
    
    
    $
    2,504
    
    
    $
    1,038Distributable income per unit
    
    $
    3.05
    
    
    $
    2.93
    
    
    $
    0.88
    
    
    $
    1.81
    
    
    $
    0.75Distributions to unitholders
    
    $
    4,115
    
    
    $
    4,028
    
    
    $
    1,039
    
    
    $
    2,663
    
    
    $
    954Distributions per unit
    
    $
    2.97
    
    
    $
    2.91
    
    
    $
    0.75
    
    
    $
    1.92
    
    
    $
    0.69
 2007
    
    2006
    
    2005
    
    2004(Audited
    
    (Audited
    
    (Unaudited
    
    (Unaudited2008
    
    and
    
    and
    
    and
    
    and(Audited)
    
    Restated)
    
    Restated)
    
    Restated)
    
    Restated)Statement of Assets, Liabilities and
Trust Corpus Selected Data:Total assets
    
    $
    2,470
    
    
    $
    2,034
    
    
    $
    1,835
    
    
    $
    1,662
    
    
    $
    1,407Trust corpus
    
    $
    1,233
    
    
    $
    1,118
    
    
    $
    1,079
    
    
    $
    903
    
    
    $
    1,062
 
 Item 7. Trustees Discussion and Analysis of Financial Condition and Results of Operations
 Change in Accounting Method.
   11




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
    
    Oil and gas royalties receivable
    
    Undistributed income
  
    
    Net income
    
    Undistributed income at beginning of year
    
    Distributions to unitholders
    
    Undistributed income at end of year
    
    Net income per unit
  
    
    Distributable income
    
    Distributable income per unit
  
    
    Trust corpus, beginning of year
    
    Distributable income
    
    Distributions to unitholders
    
    Trust corpus, end of year
 12




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Critical Accounting Policies
 
    
    Royalty income is recognized when received by Tidelands.
    
    Tidelands expenses (which include accounting, legal, and other professional
fees, trustees fees and out-of-pocket expenses) are recorded on an accrual basis.
Reserves for liabilities that are contingent or uncertain in amount may also be
established if considered necessary.
    
    Distributions to unitholders are recognized when declared by the Trustee of the
Trust.
  
    
    Royalty income is recognized in the month received rather than in the month of
production.
    
    Reserves may be established for contingencies that would not be recorded under
GAAP.
   Results of Operations
   Hurricane Damage
 13




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Summary.
  2008 as Compared to 2007.
 For Year Ended December 31,2008
    
    
    2007
    
    
    % ChangeIncome:Oil royalties
    
    $
    497,023
    
    
    $
    468,042
    
    
    
    6.19
    %Natural gas royalties
    
    
    4,077,687
    
    
    
    3,757,570
    
    
    
    8.52
    %$
    4,574,710
    
    
    $
    4,225,612
    
    
    
    8.26
    %Net production quantities:Oil (bbls)
    
    
    4,603
    
    
    
    7,071
    
    
    
    (34.90
    )%Natural gas (mcf)
    
    
    428,728
    
    
    
    515,260
    
    
    
    (16.79
    )%Average net prices:Oil (1)
    
    $
    107.98
    
    
    $
    66.19
    
    
    
    63.14
    %Natural gas (1)
    
    $
    9.51
    
    
    $
    7.29
    
    
    
    30.45
    %
 
 (1)
    
    These amounts are net of the cost of transportation from offshore leases to onshore
receiving points.  14




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2007 as Compared to 2006.
 For Year Ended December 31,2007
    
    
    2006
    
    
    % ChangeIncome:Oil royalties
    
    $
    468,042
    
    
    $
    380,975
    
    
    
    22.85
    %Natural gas royalties
    
    
    3,757,570
    
    
    
    947,849
    
    
    
    296.43
    %$
    4,225,612
    
    
    $
    1,328,824
    
    
    
    218.00
    %Net production quantities:Oil (bbls)
    
    
    7,071
    
    
    
    5,789
    
    
    
    22.15
    %Natural gas (mcf)
    
    
    515,260
    
    
    
    141,572
    
    
    
    263.96
    %Average net prices:Oil (1)
    
    $
    66.19
    
    
    $
    65.81
    
    
    
    0.58
    %Natural gas (1)
    
    $
    7.29
    
    
    $
    6.70
    
    
    
    8.81
    %
 
 (1)
    
    These amounts are net of the cost of transportation from offshore leases to onshore receiving
points.     Capital Resources and Liquidity.
 15




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Forward-Looking Statements
 Website
 www.tirtz-tidelandsroyaltytrust.com
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    16




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Item 8. Financial Statements and Supplementary Data
  Page Report of Independent Registered Public Accounting Firm
    
    
    20 Consolidated Statements of Assets, Liabilities and Trust Corpus as of December 31, 2008
and 2007
    
    
    21 Consolidated Statements of Distributable Income for the Three Years Ended December 31,
2008
    
    
    22 Consolidated Statements of Changes in Trust Corpus for the Three Years Ended December
31, 2008
    
    
    23 Notes to Consolidated Financial Statements
    
    
    24
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  Trustees Report on Internal Control Over Financial Reporting
  17




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Item 9B. Other Information
  
 Part III
 
 Item 10. Directors and Executive Officers and Corporate Governance
 Directors and Officers.
 Section 16(a) Beneficial Ownership Reporting Compliance
 Code of Ethics. th
 Committees.
 
 Item 11. Executive Compensation
  Other AnnualName of Individual or Entity
    
    Year
    
    Compensation(1)U.S. Trust, Bank of America Private
Wealth Management, the Trustee
    
    
    2008
    
    
    $
    20,5602007
    
    
    $
    20,6112006
    
    
    $
    21,248
 
 (1)
    
    Under the Indenture, the Trustee is entitled to reasonable and customary fees and compensation
for its services. 
 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, 2008
    
    of ClassUnits of Beneficial Interest
    
    Marine Petroleum Trust
P.O. Box 830650
Dallas, Texas 75283-0650
    
    
    452,366
    
    
    
    32.6
    %
 18




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions
  Name of Individual or Entity
    
    Year
    
    Amount PaidMarine Petroleum Corporation
    
    
    2008
    
    
    $
    47,9012007
    
    
    $
    50,3632006
    
    
    $
    25,558
 
 Item 14. Principal Accountant Fees and Services
  2008
    
    2007Audit Fees
    
    $
    100,242
    
    
    $
    42,400Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    
  
 Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
   4.1
    
    Indenture of Trust dated June 1, 1954, as amended, filed as an Exhibit to
the Trusts 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 the Trust, filed as Exhibit 21.1 to the Trusts Annual
Report on Form 10-K of for the fiscal year ended December 31, 2006, filed with the
Securities and Exchange Commission on April 2, 2007, and incorporated herein by
reference.31.1*
    
    Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1*
    
    Certification of the Corporate Trustee pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
   19




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      Dallas, TexasMarch 25, 2009
    
    /s/ KPMG LLP
 20




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
As of December 31, 2008 and 2007
(Audited)
 December 31,December 31,
    
    20072008
    
    (Restated)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,468,920
    
    
    $
    2,034,393Oil, gas and other mineral properties
    
    
    2
    
    
    
    2Federal income tax refundable
    
    
    1,433
    
    
    
    Total assets
    
    $
    2,470,355
    
    
    $
    2,034,395Liabilities and Trust CorpusCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    12,416Federal income taxes payable
    
    
    
    
    
    
    3,451Income distributable to unitholders
    
    
    1,236,980
    
    
    
    900,030Total current liabilities
    
    $
    1,236,980
    
    
    $
    915,897Trust corpus  authorized 1,386,525 units of
beneficial interest, issued
1,386,375 at nominal value
    
    
    1,233,375
    
    
    
    1,118,498$
    2,470,355
    
    
    $
    2,034,395
  21




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME
For the Three Years Ended December 31, 2008
(Audited)
 2007
    
    
    20062008
    
    
    (Restated)
    
    
    (Restated)Income:Oil and gas royalties
    
    $
    4,574,710
    
    
    $
    4,225,612
    
    
    $
    1,328,824Interest income
    
    
    27,039
    
    
    
    65,439
    
    
    
    41,998Total income
    
    $
    4,601,749
    
    
    $
    4,291,051
    
    
    $
    1,370,822Expenses:General and administrative expenses
    
    $
    325,871
    
    
    $
    171,807
    
    
    $
    135,980Distributable income before Federal
income taxes
    
    
    4,275,878
    
    
    
    4,119,244
    
    
    
    1,234,842Federal income taxes of subsidiary
    
    
    45,670
    
    
    
    51,600
    
    
    
    19,027Distributable income
    
    $
    4,230,208
    
    
    $
    4,067,644
    
    
    $
    1,215,815Distributable income per unit
    
    $
    3.05
    
    
    $
    2.93
    
    
    $
    0.88Distributions per unit
    
    $
    2.97
    
    
    $
    2.91
    
    
    $
    0.75Units outstanding
    
    
    1,386,375
    
    
    
    1,386,375
    
    
    
    1,386,375
  22




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS
For the Three Years Ended December 31, 2008
(Audited)
 2007
    
    
    20062008
    
    
    (Restated)
    
    
    (Restated)Trust corpus, beginning of period
    
    $
    1,118,498
    
    
    $
    1,078,721
    
    
    $
    902,713Distributable income
    
    
    4,230,208
    
    
    
    4,067,644
    
    
    
    1,215,815Distributions to unitholders
    
    
    4,115,331
    
    
    
    4,027,867
    
    
    
    1,039,807Trust corpus, end of period
    
    $
    1,233,375
    
    
    $
    1,118,498
    
    
    $
    1,078,721
  23




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 (1)
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
 (a)
    
    General
       (b)
    
    Unitholder Voting Matters
  24




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(c)
    
    Principles of Consolidation
  (d)
    
    Producing Oil and Gas Properties
   (e)
    
    Federal Income Taxes
    (f)
    
    Credit Risk Concentration and Cash Equivalents
   (g)
    
    Use of Estimates
  (h)
    
    Distributable Income per Unit
  25




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##### Table of Contents



(i)
    
    Significant Royalty Sources
  Year Ended December 31,2008
    
    2007
    
    2006Devon Energy Production Company
    
    
    77
    %
    
    
    74
    %
    
    
    59
    %Newfield Exploration Co.
    
    
    
    
    
    
    10
    %
    
    
    NOEX Energy, Inc.
    
    
    8
    %
    
    
    7
    %
    
    
    26
    %W & T Offshore
    
    
    7
    %
    
    
    6
    %
    
    
    13
    %Others
    
    
    8
    %
    
    
    3
    %
    
    
    2
    %100
    %
    
    
    100
    %
    
    
    100
    %
 (2)
    
    CHANGE IN ACCOUNTING METHOD
    
    
    Oil and gas royalties receivable
    
    Undistributed income
  
    
    Net income
    
    Undistributed income at beginning of period (year)
    
    Distributions to unitholders
    
    Undistributed income at end of period (year)
    
    Net income per unit
  
    
    Distributable income
    
    Distributable income per unit
 26




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##### Table of Contents




    
    Trust corpus, beginning of period (year)
    
    Distributable income
    
    Distributions to unitholders
    
    Trust corpus, end of period (year)
  CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 Assets
 As Originally
    
    
    
    
    
    As Reported UnderReported Under
    
    Effect of
    
    Modified Cash BasisAccrual Method
    
    Accounting Change
    
    MethodAs of December 31,
2007(Audited)Total assets (1)
    
    $
    2,859,881
    
    
    $
    (825,486
    )
    
    $
    2,034,395As of December 31,
2006(Audited)Total assets (1)
    
    $
    2,665,574
    
    
    $
    (831,022
    )
    
    $
    1,834,552
 
 (1)
    
    Oil and gas royalties receivables are not reported as an asset under the modified cash
basis method. As a result, total assets have been reduced by the amount of oil and gas
royalties receivables previously reported. Liabilities and Trust Corpus
 As Originally
    
    
    
    
    
    
    As Reported UnderReported Under
    
    
    Effect of
    
    
    Modified Cash BasisAccrual Method
    
    
    Accounting Change
    
    
    MethodAs of December 31, 2007
(Audited)Trust corpus (1)
    
    $
    1,943,984
    
    
    $
    (825,486
    )
    
    $
    1,118,498Total liabilities and trust corpus (1)
    
    $
    2,859,881
    
    
    $
    (825,486
    )
    
    $
    2,034,395As of December 31, 2006
(Audited)Trust corpus (1)
    
    $
    1,909,743
    
    
    $
    (831,022
    )
    
    $
    1,078,721Total liabilities and trust corpus (1)
    
    $
    2,665,574
    
    
    $
    (831,022
    )
    
    $
    1,834,552
 
 (1)
    
    Oil and gas royalties receivables are not reported as trust corpus under the modified
cash basis method. As a result, trust corpus and total liabilities and trust corpus have
been reduced by the amount of oil and gas royalties receivables previously reported.  27




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CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME
 As Originally
    
    
    
    
    
    As Reported UnderReported Under
    
    Effect of
    
    Modified Cash BasisAccrual Method
    
    Accounting Change
    
    MethodAs of December 31,
2007(Audited)Oil and gas royalties
    
    $
    4,220,076
    
    
    $
    5,536
    
    
    $
    4,225,612Total income
    
    $
    4,285,515
    
    
    $
    5,536
    
    
    $
    4,291,051Distributable income
before Federal
income taxes
    
    $
    4,113,708
    
    
    $
    5,536
    
    
    $
    4,119,244As of December 31,
2006
(Audited)Oil and gas royalties
    
    $
    2,025,412
    
    
    $
    (696,588
    )
    
    $
    1,328,824Total income
    
    $
    2,067,410
    
    
    $
    (696,588
    )
    
    $
    1,370,822Distributable income
before Federal
income taxes
    
    $
    1,931,430
    
    
    $
    (696,588
    )
    
    $
    1,234,842As of December 31,
2005
(Audited)Oil and gas royalties
    
    $
    2,362,759
    
    
    $
    261,582
    
    
    $
    2,624,341Interest and other
income (1)
    
    $
    36,954
    
    
    $
    1,403
    
    
    $
    38,357Total income
    
    $
    2,399,713
    
    
    $
    262,985
    
    
    $
    2,662,698Distributable income
before Federal
income taxes
    
    $
    2,259,038
    
    
    $
    262,985
    
    
    $
    2,522,023
 
 (1)
    
    This change relates to interest income that was previously accrued for in 2004 but was
not received until 2005.  28




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TIDELANDS ROYALTY TRUST B AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 (3)
    
    SUPPLEMENTAL INFORMATION RELATING TO OIL AND NATURAL GAS RESERVES (UNAUDITED)
  For Year Ended December 31,2008
    
    
    2007
    
    
    2006Net production quantities:Oil (bbls)
    
    
    4,603
    
    
    
    7,071
    
    
    
    5,789Natural gas (mcf)
    
    
    428,728
    
    
    
    515,260
    
    
    
    141,572
 (4)
    
    SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
  Oil and
    
    
    
    
    
    
    DistributableNatural Gas
    
    
    Distributable
    
    
    Income PerRoyalties
    
    
    Income
    
    
    UnitQuarter ended:March 31, 2008 (Restated)
    
    $
    1,041,493
    
    
    $
    951,070
    
    
    $
    0.69June 30, 2008
    
    
    987,340
    
    
    
    914,886
    
    
    
    0.66September 30, 2008
    
    
    1,383,855
    
    
    
    1,269,745
    
    
    
    0.92December 31, 2008
    
    
    1,162,022
    
    
    
    1,094,507
    
    
    
    0.78$
    4,574,710
    
    
    $
    4,230,208
    
    
    $
    3.05Quarter ended:March 31, 2007 (Restated)
    
    $
    1,103,670
    
    
    $
    1,062,963
    
    
    $
    0.77June 30, 2007 (Restated)
    
    
    1,095,667
    
    
    
    1,051,249
    
    
    
    0.76September 30, 2007 (Restated)
    
    
    1,136,840
    
    
    
    1,100,420
    
    
    
    0.79December 31, 2007 (Restated)
    
    
    889,435
    
    
    
    853,012
    
    
    
    0.62$
    4,225,612
    
    
    $
    4,067,644
    
    
    $
    2.94
 (5)
    
    TEXAS FRANCHISE TAX
  29




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e.g. e.g.
   30




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SIGNATURES
  Date: March 25, 2009
    Tidelands Royalty Trust B
(Registrant)By:
    U.S. Trust, Bank of America Private WealthManagement (in its capacity as Corporate Trustee of Tidelands Royalty Trust B and not in
its individual capacity or otherwise)By:
    /s/ Ron E. HooperRon E. HooperSenior Vice President  NAME
    
    CAPACITIES
    
    DATEU.S. Trust, Bank of America Private
Wealth Management
    
    Corporate Trustee
    
    March 25, 2009
 By:
    /s/ Ron E. HooperRon E. HooperSenior Vice President  31




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EXHIBIT INDEX
 ExhibitNumber
    
    Description4.1
    
    Indenture of Trust dated June 1, 1954, as amended, filed as an Exhibit to the Trusts
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 the Trust, filed as Exhibit 21.1 to the Trusts Annual Report on Form 10-K of
for the fiscal year ended December 31, 2006, filed with the Securities and Exchange Commission
on April 2, 2007, and incorporated herein by reference.31.1*
    
    Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley of Act
of 2002.32.1*
    
    Certification of the Corporate Trustee pursuant to Section 906 of the Sarbanes-Oxley of Act
of 2002.
 
 *
    
    Filed herewith. 32