**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

**FORM 10-Q**

**(Mark One)**

**x**               QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the Quarterly PeriodEnded June 30, 2006**

**or**

**o**                  TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Commission file number 1-11450**

----

**Santa Fe Energy Trust**

(Exact name of registrant as specified in its charter)

| **Texas**                                         |   | **76-6081498**                             |
|---------------------------------------------------|--------|--------------------------------------------|
| (State or Other  Jurisdiction of Incorporation or |   | (I.R.S.  Employer Identification No.) |
| Organization)                                     |   |                                       |
| **JPMorgan  Chase Bank, N.A., Trustee**           |   | ** **                                 |
| **Institutional  Trust Services**                 |   | ** **                                 |
| **221  West Sixth Street**                        |   | ** **                                 |
| **Austin,  Texas**                                |   | **78701**                                  |
| (Address of  Principal Executive Offices)         |   | (Zip Code)                                 |

 

Registrant’stelephone number, including area code: **(800) 852-1422**

Former name, former addressand former fiscal year, if changed from last report.

**700 LavacaAustin, Texas 78701**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes x   No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Acceleratedfiler x   Non-accelerated filer o

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

Yes o   No x

On August 1, 2006, 6,300,000 Depositary Unitswere outstanding.

 

----

**PART I—FINANCIALINFORMATION**

**Item 1.**                        *Financial Statements*.

**SANTA FE ENERGYTRUSTSTATEMENTS OF CASH PROCEEDS AND DISTRIBUTABLE CASH (Unaudited)(In thousands, except per unit data)**

| ** **                                      | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                      | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Royalty income:                                 |       |                                            |       |                                          |       |   |   |   |   |
| ODC royalty                                     |       | $                                               | 3,225      |                                          | $          | 2,823 |   | $ | 6,629 |   | $ | 5,795 |   |
| Net profits royalty                             |       | 4,341                                           |       | 2,998                                         |       | 7,308 |   | 6,044 |   |
| Total royalties                                 |       | 7,566                                           |       | 5,821                                         |       | 13,937 |   | 11,839 |   |
| Administrative  fee to Devon Energy Corporation |       | (79                                             | )          | (77                                           | )          | (156 | ) | (151 | ) |
| Cash withheld for  trust expenses               |       | (100                                            | )          | (50                                           | )          | (200 | ) | (150 | ) |
| Distributable  cash                             |       | $                                               | 7,387      |                                          | $          | 5,694 |   | $ | 13,581 |   | $ | 11,538 |   |
| Distributable  cash per trust unit              |       | $                                               | 1.17243    |                                          | $          | 0.90372 |   | $ | 2.15567 |   | $ | 1.83144 |   |
| Trust units outstanding                         |       | 6,300                                           |       | 6,300                                         |       | 6,300 |   | 6,300 |   |

 

**STATEMENTS OFASSETS, LIABILITIES AND TRUST CORPUS(In thousands, except unit data)**

| ** **                                                      | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                      | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| ASSETS                                                          |       |                    |       |                        |       |   |   |   |   |
| Current  assets—cash                                       |       |                    | $          | 96                          |       |   |   | $ | 93 |   |   |
| Investment in  royalty interests, at cost                       |       |                    | 87,276     |                        |       |   | 87,276 |   |   |
| Less: accumulated  amortization                                 |       |                    | (83,093    | )                           |       |   | (82,429 | ) |   |
|                                                            |       |                    | 4,183      |                        |       |   | 4,847 |   |   |
| Total assets                                                    |       |                    | $          | 4,279                       |       |   |   | $ | 4,940 |   |   |
| LIABILITIES AND TRUST CORPUS                                    |       |                    |       |                        |       |   |   |   |   |
| Current  liabilities—advance from Devon Energy Corporation |       |                    | $          | 225                         |       |   |   | $ | — |   |   |
| Trust corpus,  6,300,000 trust units issued and outstanding     |       |                    | 4,054      |                        |       |   | 4,940 |   |   |
| Total liabilities and  trust corpus                             |       |                    | $          | 4,279                       |       |   |   | $ | 4,940 |   |   |

 

The accompanying notes are an integral part of the financial statements.

2

----

**SANTAFE ENERGY TRUSTSTATEMENTS OF CHANGES IN TRUST CORPUS (Unaudited)Six Months Ended June 30, 2006 and 2005(In thousands)**

| Balance at  December 31, 2004 |   | $       | 7,296  |   |
|------------------------------------|--------|---------|--------|--------|
| Cash proceeds                      |   | 11,688  |   |
| Cash distributions                 |   | (11,538 | )      |
| Trust expenses                     |   | (475    | )      |
| Amortization of royalty interests  |   | (1,035  | )      |
| Balance at  June 30, 2005     |   | $       | 5,936  |   |
| Balance at December 31, 2005  |   | $       | 4,940  |   |
| Cash proceeds                      |   | 13,781  |   |
| Cash distributions                 |   | (13,581 | )      |
| Trust expenses                     |   | (422    | )      |
| Amortization of royalty interests  |   | (664    | )      |
| Balance at June 30,  2006     |   | $       | 4,054  |   |

 

The accompanying notes are an integral part of the financial statements.

3

----

**SANTA FE ENERGY TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited)**

**Note 1. Summary of Significant AccountingPolicies**

The financial statementsof the Trust are prepared on the cash basis of accounting for revenues andexpenses. Royalty income is recorded when received (generally during thequarter following the end of the quarter in which the income from the RoyaltyProperties is received by Devon) and is net of any cash basis exploration anddevelopment expenditures and amounts reserved for any future exploration anddevelopment costs. Expenses of the Trust, which include accounting,engineering, legal and other professional fees, Trustee fees, an administrativefee paid to Devon and out-of-pocket expenses, are recognized when paid. Underaccounting principles generally accepted in the United States of America,revenues and expenses would be recognized on an accrual basis. Amortization ofthe Trust’s investment in Royalty Interests is recorded using theunit-of-production method in the period in which the cash is received withrespect to such production; therefore, a statement of cash flows is notpresented.

The Trust is a grantortrust and as such is not subject to income taxes and accordingly no recognitionhas been given to income taxes in the Trust’s financial statements. The taxconsequences of owning Trust Units are included in the income tax returns ofthe individual Trust Unit holders.

The preparation of theTrust’s financial statements requires the use of certain estimates. Actualresults may differ from such estimates.

In the opinion of theTrustee and Devon Energy Corporation (“Devon”), all adjustments (all of whichare normal and recurring) have been made which are necessary to fairly statethe financial position, cash proceeds and distributable cash of the Trust.

The accompanying financialstatements and notes thereto should be read in conjunction with the financialstatements and notes thereto included in the Trust’s 2005 Annual Report on Form 10-K.

**Note 2. Distributionto Trust Unit Holders**

The Trust has receivedroyalty payments net of administrative fees paid to Devon and madedistributions as follows:

| ** **     | ** ** | **Royalty**                                                       | ** ** | ** **        | ** ** | ** **                   | ** ** |
|----------------|------------|-------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **     | ** ** | **Payment**                                                       | ** ** | **Distributions** | ** ** |
| ** **     | ** ** | **Received**                                                      | ** ** | **Amount**        | ** ** | **Per Trust Unit** | ** ** |
| ** **     | ** ** | **(in thousands, except per unit data)** | ** ** |
| 2005           |       |                                                              |       |              |       |                         |       |   |   |
| First quarter  |       | $                                                                 | 5,944      |              | $          | 5,844                        |       |   | $ | 0.92772 |   |   |
| Second quarter |       | 5,744                                                             |       | 5,694             |       |                         | 0.90372    |   |   |
| Third quarter  |       | 8,668                                                             | (a)        | 8,318             |       |                         | 1.32023    |   |   |
| Fourth quarter |       | 5,449                                                             |       | 5,349             |       |                         | 0.84909    |   |   |
|           |       | $                                                                 | 25,805     |              | $          | 25,205                       |       |   | $ | 4.00076 |   |   |
| 2006           |       |                                                              |       |              |       |                         |       |   |   |
| First quarter  |       | $                                                                 | 6,294      |              | $          | 6,194                        |       |   | $ | 0.98324 |   |   |
| Second quarter |       | $                                                                 | 7,487      | (b)               | $          | 7,387                        |       |   | $ | 1.17243 |   |   |

----

        (a) Includes proceeds from the sale of Net Profitsproperties of $2.4 million or $0.37372 per Trust Unit.

       (b) Includes proceeds from the sale of Net Profits properties of $0.4million or $0.05643 per Trust Unit.

4

----

**SANTA FE ENERGY TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)**

**Note 3. Commitmentsand Contingencies**

The Royalty Propertiesrelated to the Trust are the subject of lawsuits and governmental proceedingsfrom time to time arising in the ordinary course of business. While the outcomeof lawsuits or other proceedings involving the Royalty Properties cannot be predictedwith certainty, these matters are not expected to have a material adverseeffect on the financial position or cash proceeds and distributable cash of theTrust.

**Note 4. PropertyDivestitures**

In the second quarter of2006, the Trust sold interests in wells in Ward County, Texas, for proceeds of$0.4 million, or $0.05643 per Trust Unit. In the third quarter of 2006, theTrust sold interests in wells in Love County, Oklahoma for proceeds of $0.1million, or $0.02000 per Trust Unit.

**Note 5. Remittanceof Prior Period Operating Expenses**

In the second quarter of2006, Devon determined that in prior periods, it had overstated certain of theTrust’s operating expenses in the calculations of the Net Profits Royalties. Accordingly,in the second quarter of 2006, Devon remitted $1.3 million or $0.20973 perTrust Unit to the Trust to adjust for the prior periods’ overstatement ofexpenses.

**Note 6. OtherMatters**

On April 8, 2006, JPMorgan Chase Bank, N.A., andBank of New York announced an agreement pursuant to which Bank of New Yorkwould acquire JPMorgan Chase’s corporate Trust business which serves as theTrustee for the Santa Fe Energy Trust. The transaction is not expected to haveany material effect on the Trust.

5

----

**Item 2.**                        *Management’s Discussion and Analysis of Financial Condition and Resultsof Operations*

The following discussionaddresses material changes in results of operations for the three and sixmonths ended June 30, 2006, compared to the three and six months ended June 30,2005 and in financial condition since December 31, 2005. It is presumedthat readers have read or have access to the Trust’s 2005 Annual Report on Form 10-Kwhich includes disclosures regarding critical accounting policies as part of Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.

The Trust will terminateand the Net Profits Royalties are to be sold on or before the Liquidation Date,February 15, 2008. Each holder of Depositary Units of record as of the daynext preceding the Liquidation Date will be entitled to receive a liquidatingdistribution equal to (1) $20 per Depositary Unit from the proceeds of thematured Treasury Obligations, plus (2) a pro rata portion of the netproceeds from the sale of Net Profits Royalties, to the extent not previouslydistributed. Following the Liquidation Date, Holders will no longer receivequarterly distributions and the Depositary Units will no longer trade. Underthe Trust Agreement, the Trustee is to use all reasonable efforts to completesales of all Net Profit Royalties on any date after June 30, 2006 and onor before June 30, 2007. The timing of sales of Net Profits Royalties,future oil and gas prices and future production levels are uncertain. These andother factors make uncertain the ultimate liquidation value of the Trust formatters unrelated to the Treasury obligations. Please read “Description of theTrust Units and Depositary Units—Termination and Liquidation of the Trust” inthe Trust’s 2005 Annual Report on Form 10-K.

**General; Liquidity and Capital Resources**

The Trust’s results ofoperations are dependent upon the sales prices and quantities of oil and gasproduced from the Royalty Properties, the costs of producing such resources andthe amount of capital expenditures made with respect to such properties.

Since, on an equivalentbasis, the majority of the Trust’s proved reserves are crude oil, evenrelatively modest changes in crude oil prices may significantly affect theTrust’s revenues and results of operations. Crude oil prices are subject tosignificant changes in response to fluctuations in the domestic and worldsupply and demand and other market conditions as well as the world politicalsituation as it affects OPEC and other oil producing countries. In addition, asubstantial portion of the Trust’s revenues come from properties which producesour (i.e., high sulfur content) crude oil which sells at prices lower thansweeter (i.e., low sulfur content) crude oils.

Natural gas pricesfluctuate due to weather conditions, the level of natural gas in storage, therelative balance between supply and demand and other economic factors.

Trust expenses includeaccounting, engineering, legal and other professional fees, Trustee fees, anadministrative fee paid to Devon and other out-of-pocket expenses. The Trust’sability to pay expenses primarily depends on receipt of royalty income. Devonmay, at its sole discretion and without obligation to do so, advance funds tothe Trust to enable the Trust to pay expenses. The Trustee is authorized toborrow funds required to pay liabilities of the Trust, provided that any suchborrowings are repaid in full prior to making further distributions to Holders.As of June 30, 2006, there was an outstanding advance to the Trust fromDevon of $225,000.

**Results ofOperations**

Royaltyincome is recorded by the Trust when received, generally during the quarterfollowing the end of the quarter in which revenues are received and costs andexpenses are paid by Devon. Cash proceeds 

6

----

from the Royalty Properties may fluctuate from quarterto quarter due to the timing of receipts and payment of revenues and costs andexpenses as well as changes in prices and production volumes. The followingtable reflects pertinent information with respect to the cash proceeds from theRoyalty Properties and the net distributable cash of the Trust. The informationpresented with respect to the second quarter of 2006 reflects revenues receivedand costs and expenses paid by Devon in the first quarter of 2006. On August 31,2006, the Trust will make a cash distribution of $5.7 million, or $0.89734per Trust Unit, to unitholders of record on August 15, 2006.

| ** **                                                                       | ** **   | **Three Months Ended  June 30,** | ** **   | **Six Months Ended  June 30,** | ** **   | **Third  Quarter** | ** **   |
|----------------------------------------------------------------------------------|--------------|-------------------------------------------------|--------------|-----------------------------------------------|--------------|--------------------|--------------|
| ** **                                                                       | ** **   | **2006**                                        | ** **   | **2005**                                      | ** **   | **2006**           | ** **   | **2005** | ** ** | **2006** | ** ** |
| ***Volumes  and Prices***                                                        | *** *** | *** ***                                    | *** *** | *** ***                                  | *** *** | *** ***       | *** *** | *** *** | *** *** | *** *** | *** *** |
| Oil volumes (Bbls):                                                              |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Wasson ODC royalty                                                               |         | 62,200                                          |         | 66,400                                        |         | 128,600            |         | 141,300 |   | 62,200 |   |
| Net profits royalties                                                            |         | 33,147                                          |         | 42,110                                        |         | 72,075             |         | 89,185 |   | 35,018 |   |
| Gas volumes (Mcf):                                                               |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Net profits royalties                                                            |         | 185,791                                         |         | 353,718                                       |         | 382,839            |         | 762,239 |   | 191,359 |   |
| Oil average prices ($/Bbl):                                                      |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Wasson ODC royalty                                                               |         | $                                               | 55.73        |                                          | $            | 44.65              |         | $ | 54.74 |   | $ | 43.57 |   | $ | 63.94 |   |
| Net profits royalty                                                              |         | 53.55                                           |         | 38.88                                         |         | 53.70              |         | 39.27 |   | 53.23 |   |
| Gas average prices ($/Mcf):                                                      |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Net profits royalties                                                            |         | 9.36                                            |         | 5.83                                          |         | 8.65               |         | 5.44 |   | 6.55 |   |
| ***Cash  Proceeds and Distributable Cash (in thousands, except per unit data)*** | *** *** | *** ***                                    | *** *** | *** ***                                  | *** *** | *** ***       | *** *** | *** *** | *** *** | *** *** | *** *** |
| Wasson ODC royalty:                                                              |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Sales                                                                            |         | $                                               | 3,466        |                                          | $            | 2,965              |         | $ | 7,040 |   | $ | 6,156 |   | $ | 3,977 |   |
| Operating expenses                                                               |         | (241                                            | )            | (142                                          | )            | (411               | )            | (361 | ) | (264 | ) |
|                                                                             |         | 3,225                                           |         | 2,823                                         |         | 6,629              |         | 5,795 |   | 3,713 |   |
| Net profits royalty:                                                             |         |                                            |         |                                          |         |               |         |   |   |   |   |
| Sales                                                                            |         | 3,523                                           |         | 3,698                                         |         | 7,199              |         | 7,648 |   | 3,124 |   |
| Proceeds from property sales                                                     |         | 356                                             |         | —                                        |         | 356                |         | — |   | 126 |   |
| Operating (expenses) recoveries                                                  |         | 584                                             |         | (688                                          | )            | (90                | )            | (1,586 | ) | (799 | ) |
| Capital expenditures                                                             |         | (122                                            | )            | (12                                           | )            | (157               | )            | (18 | ) | (7 | ) |
|                                                                             |         | 4,341                                           |         | 2,998                                         |         | 7,308              |         | 6,044 |   | 2,444 |   |
| Total royalties                                                                  |         | 7,566                                           |         | 5,821                                         |         | 13,937             |         | 11,839 |   | 6,157 |   |
| Administrative  fee to Devon Energy Corporation                                  |         | (79                                             | )            | (77                                           | )            | (156               | )            | (151 | ) | (79 | ) |
| Payment received                                                                 |         | 7,487                                           |         | 5,744                                         |         | 13,781             |         | 11,688 |   | 6,078 |   |
| Cash withheld for  trust expenses                                                |         | (100                                            | )            | (50                                           | )            | (200               | )            | (150 | ) | (425 | ) |
| Distributable  cash                                                              |         | $                                               | 7,387        |                                          | $            | 5,694              |         | $ | 13,581 |   | $ | 11,538 |   | $ | 5,653 |   |
| Distributable  cash per unit                                                     |         | $                                               | 1.17243      |                                          | $            | 0.90372            |         | $ | 2.15567 |   | $ | 1.83144 |   | $ | 0.89734 |   |

 

7

----

Sales increased $0.3 million from the secondquarter of 2005 to the second quarter of 2006. Sales increased$1.8 million due to a $12.56 per barrel increase in the average price ofoil from $42.41 per barrel in the second quarter of 2005 to $54.97 per barrel inthe second quarter of 2006 and due to a $3.53 per Mcf increase in the averagegas price from $5.83 per Mcf in the second quarter of 2005 to $9.36 in thesecond quarter of 2006. Production on a barrels of oil equivalent (“Boe”) basisfrom the second quarter of 2005 to the second quarter of 2006 decreasedapproximately 41,000 Boe, causing sales to decrease $1.5 million. This decreasein production was primarily the result of the sale of certain Net ProfitsProperties in 2005 and natural production declines.

Sales increased $0.4 million from the first half of2005 to the first half of 2006. Sales increased $3.7 million due to a$12.47 per barrel increase in the average price of oil from $41.90 per barrelduring the first half of 2005 to $54.37 per barrel during the first half of2006 and due to a $3.21 per Mcf increase in average gas price from $5.44 perMcf during the first half of 2005 to $8.65 per Mcf during the first half of2006. Production on a Boe basis from the first half of 2005 to the first halfof 2006 decreased approximately 93,000 Boe, causing sales to decrease $3.3million. This decrease in production was primarily the result of the sale ofcertain Net Profits Properties in 2005 and natural production declines.

Sales increased $0.1 million from the second quarterof 2006 to the third quarter of 2006. Production on a Boe basis from the secondquarter of 2006 to the third quarter of 2006 increased approximately 3,000 Boe,causing sales to increase by $0.2 million. This was partially offset by a decreasein sales of $0.1 million due to a $2.81 per Mcf decrease in the average gasprice from $9.36 per Mcf in the second quarter of 2006 to $6.55 per Mcf in thethird quarter of 2006, partially offset by a $5.11 per barrel increase in theaverage price of oil from $54.97 per barrel in the second quarter of 2006 to$60.08 per barrel in the third quarter of 2006.

In the second quarter of 2006, the Trust soldinterests in wells in Ward County, Texas, for proceeds of $0.4 million, or$0.05643 per Trust Unit. In the third quarter of 2006, the Trust sold interestsin wells in Love County, Oklahoma for proceeds of $0.1 million, or $0.02000 perTrust Unit.

Operating expenses decreased $1.2 million from thesecond quarter of 2005 to the second quarter of 2006, decreased $1.4 millionfrom the first half of 2005 to the first half of 2006 and increased $1.4million from the second quarter of 2006 to the third quarter of 2006. Thisactivity was primarily due to an out-of-period adjustment related to the NetProfits Royalties. In the second quarter of 2006, Devon determined that inprior periods, it had overstated certain of the Trust’s operating expenses inthe calculations of the Net Profits Royalties. Accordingly, in the secondquarter of 2006, Devon remitted $1.3 million or $0.20973 per Trust Unit tothe Trust to adjust for the prior periods’ overstatement of expenses.

Proceeds from the Net Profits Royalties are net ofcapital expenditures with respect to the development of the Net ProfitsProperties. Capital expenditures were $122,000, $12,000, $157,000, $18,000 and$7,000 for the second quarter of 2006, the second quarter of 2005, the sixmonths ended 2006, the six months ended 2005 and the third quarter of 2006,respectively.

Cash withheld for trust expenses increased $325,000from the second quarter of 2006 to the third quarter of 2006 to repay anadvance from Devon Energy Corporation for $225,000 related to trust expensesincurred during the quarter.

8

----

**Forward LookingStatements**

Management’s Discussionand Analysis of Financial Condition and Results of Operations includes certainstatements (other than statements of historical fact) that constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. When used herein,the words “anticipates,” “expects,” “believes,” “intends” or “projects” andsimilar expressions are intended to identify forward-looking statements.It is important to note that actual results could differ materially from thoseprojected by such forward-looking statements. Although it is believedthat the expectations reflected in such forward-looking statements arereasonable and such forward-looking statements are based upon the bestdata available at the time this report is filed with the Securities andExchange Commission, no assurance can be given that such expectations willprove correct. Factors that could cause results to differ materially from theresults discussed in such forward-looking statements include: productionvariances from expectations, volatility of oil and gas prices, the need todevelop and replace reserves, capital expenditures required to fund operations,environmental risks, uncertainties about estimates of reserves, competition andgovernment regulation and political risks. All such forward-lookingstatements in this document are expressly qualified in their entirety by thecautionary statements in this paragraph.

**Item 3.**                        *Quantitative and Qualitative Disclosures About Market Risk*

**Disclosures AboutMarket Risk**

Not applicable.

**Item 4.**                        *Controls and Procedures*

**Evaluation ofDisclosure Controls and Procedures**

The Trustee maintains disclosure controls andprocedures designed to ensure that information required to be disclosed by theTrust in the reports that it files or submits under the Exchange Act of 1934,as amended, is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and regulations. Disclosure controlsand procedures include controls and procedures designed to ensure thatinformation required to be disclosed by the Trust is accumulated andcommunicated by Devon to JPMorgan Chase Bank, N.A., as Trustee of the Trust,and its employees who participate in the preparation of the Trust’s periodicreports as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report,the Trustee carried out an evaluation of the Trustee’s disclosure controls andprocedures. Mike Ulrich, as Trust Officer of the Trustee, has concluded thatthe controls and procedures are effective.

Due to the contractualarrangements of (i) the Trust Agreement and (ii) Devon’s conveyancesof the Royalty Interests to the Trust regarding information furnished by theworking interest owners, the Trustee relies on (a) information provided byDevon and the working interest owners, including all information relating tothe Royalty Properties burdened by the Royalty Interests, such as operatingdata, data regarding operating and capital expenditures, geological datarelating to reserves, information regarding environmental and other conditionsrelating to the Royalty Properties, liabilities and potential liabilities 

9

----

potentiallyaffecting the revenues to the Trust’s interest, the effects of regulatorychanges and of the compliance of the operators of the Royalty Properties withapplicable laws, rules and regulations, the number of producing wells andacreage, and plans for future operating and capital expenditures, and (b) conclusionsof independent reserve engineers regarding reserves. The conclusions of theindependent reserve engineers are based on information received from Devon andthe working interest owners.

**Changes in InternalControls**

To the knowledge of the Trustee, there have been nosignificant changes in the Trustee’s internal controls or in other factors thatcould significantly affect the Trustee’s internal controls subsequent to thedate the Trustee completed its evaluation. The Trustee notes for purposes ofclarification that it has no authority over, and makes no statement concerning,the internal controls of Devon and the working interest owners.

Due to the natureof the Trust, as well as the nature of the underlying Royalty Interests, theremay be inherent weaknesses that are not subject to change or modification bythe Trustee or its employees. Devon operates only a small number of the RoyaltyProperties and is not expected to be able to significantly influence theoperations of future development of the Royalty Properties that are royaltyinterests or that consist of relatively small working interests. Suchoperations will generally be controlled by persons unaffiliated with theTrustee and Devon. Devon, however, owns a working interest in the Wasson ODCUnit and may be able to exercise some influence, though not control, over unitoperations. The contractual limitations creating inherent weaknesses indisclosure controls and procedures may be deemed to include:

·       Theworking interest owners alone control (i) historical operating data,including production volumes, marketing of products, operating and capitalexpenditures, environmental and other liabilities, the effects of regulatorychanges and the number of producing wells and acreage, (ii) plans forfuture operating and capital expenditures, (iii) geological data relatingto reserves and (iv) projected production. Neither the Trustee nor Devon(to the extent Devon is not also the working interest owner) control thisinformation, and they rely entirely on the working interest owners to provideaccurate and timely information when requested for use in the Trust’s reports.

·       TheTrustee relies on information provided by Devon that is collected by Devon fromworking interest owners. While the Trustee may request information throughDevon, only Devon has authority to request and receive financial informationregarding the Royalty Properties from the working interest owners. The Trusteegenerally does not have any direct contact with working interest owners, otherthan Devon, and relies on Devon to request and obtain information for use inthe Trust’s reports.

·       Underthe terms of the Trust Agreement, the Trustee is entitled to, and in fact doesrely, upon certain experts in good faith, including the independent reserveengineer with respect to the annual reserve report. The conveyances alsorestrict access to and the review of confidential data provided by Devon andworking interest owners. While the Trustee has no reason to believe itsreliance upon experts is unreasonable, this reliance on experts and restrictedaccess to information may be viewed as a weakness.

·       TheTrustee does not intend to expand its responsibilities beyond those permittedor required by the Trust Agreement.

10

----

**PART IIOTHER INFORMATION**

**Item1.****                        *Legal Proceedings.***

The Royalty Propertiesrelated to the Trust are the subject of lawsuits and governmental proceedingsfrom time to time arising in the ordinary course of business. While the outcomeof lawsuits or other proceedings involving the Royalty Properties cannot bepredicted with certainty, these matters are not expected to have a materialadverse effect on the financial position or cash proceeds and distributablecash of the Trust.

**Item 1A.**                *Risk Factors.*

There have been nomaterial changes to risk factor information included in Item 1A. “Risk Factors”in our 2005 Annual Report on Form 10-K.

**Item 6.**                        *Exhibits*

(a)           Exhibits

| ** ** | ** ** | ** **                                                                                                                                                  | ** ** | **SEC File or  Registration Number** | ** ** | **Exhibit  Number** | ** ** |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------|------------|
| 3(a)       | *          | Form of  Trust Agreement of Santa Fe Energy Trust                                                                                                      |       |                                                | 33-51760   |                |       |   | 3.1 |   |   |
| 4(a)       | *          | Form of  Custodial Deposit Agreement                                                                                                                   |       |                                                | 33-51760   |                |       |   | 4.2 |   |   |
| 4(b)       | *          | Form of  Secure Principal Energy Receipt (included as Exhibit A to  Exhibit 4(a))                                                            |       |                                                | 33-51760   |                |       |   | 4.1 |   |   |
| 10(a)      | *          | Form of Net  Profits Conveyance (Multi-State)                                                                                                          |       |                                                | 33-51760   |                |       |   | 10.1 |   |   |
| 10(b)      | *          | Form of  Wasson Conveyance                                                                                                                             |       |                                                | 33-51760   |                |       |   | 10.2 |   |   |
| 10(c)      | *          | Form of  Louisiana Mortgage                                                                                                                            |       |                                                | 33-51760   |                |       |   | 10.3 |   |   |
| 31         |       | Certification  required by Rule 13a-14(a) or Rule 15d-14(a) under  the Securities Exchange Act of 1934.                                 |       |                                                |       |                |       |   |   |   |   |
| 32         |       | Certification required  by Rule 13a-14(b) or Rule 15d-14(b) under the  Securities Exchange Act of 1934 and 18 U.S.C. Section 1350. |       |                                                |       |                |       |   |   |   |   |

 

11

----

**SIGNATURE**

Pursuant to therequirements of the Securities Exchange Act 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, on the 8th day of August, 2006.

|            | SANTA FE ENERGY  TRUST |
|------------|------------------------|
| ** ** | ** **             | **(Registrant)** | ** ** |
| ** ** | By                     | JPMORGAN CHASE BANK,  N.A., TRUSTEE |
|       | By                     | /s/  MIKE ULRICH |
|       |                   | Mike Ulrich |
|       |                   | *Vice  President and Trust Officer* |

 

Date: August 8, 2006

The Registrant, Santa Fe Energy Trust, has noprincipal or chief executive officer, principal or chief financial officer,controller or principal accounting officer, board of directors or personsperforming similar functions. Accordingly, no additional signatures areavailable and none have been provided.

12

----