##### 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, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-12474
 TORCH ENERGY ROYALTY TRUST
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    74-6411424
(I.R.S. Employer Identification No.)
 Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of Principal Executive Offices; Zip Code)
 (Registrants Telephone number, Including Area Code)
(302) 636-6016
 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 Title of each class
    
    Name of Each Exchange on
Which RegisteredUnits of Beneficial Interest
    
    New York Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
 o þ
 o þ
 o þ
 o o
 þ
 See
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Small reporting company þ
 o þ




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##### 



PageNumberPART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    6Item 1B. Unresolved Staff Comments
    
    
    12Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    15Item 4. (Removed and Reserved)
    
    
    16PART IIItem 5. Market for Registrants Units, Related
Unitholder Matters and Registrant Purchases
of Equity Securities
    
    
    17Item 6. Selected Financial Data
    
    
    17Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    18Item 7a. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    21Item 8. Financial Statements and Supplementary Data
    
    
    23Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
    
    
    38Item 9A. Controls and Procedures
    
    
    38Item 9B. Other Information
    
    
    39PART IIIItem 10. Directors, Executive Officers and Corporate
Governance
    
    
    40Item 11. Executive Compensation
    
    
    40Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Unitholders
Matters
    
    
    40Item 13. Certain Relationships and Related Transactions
    
    
    41Item 14. Principal Accountant Fees and Services
    
    
    43PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    44Signatures
    
    
    46EX-23.1EX-23.2EX-23.3EX-31.1EX-32.1




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PART I
 
 Item 1.
Business
  General
    1




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See See
    2




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See also
   Marketing Arrangements and Price Sharing
  3




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Gathering, Treating and Transportation Arrangements
    4




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See also
 Net Profits Interests
   Availability of Reports
  5




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http://www.nyse.com .
 
 Item 1A.
Risk Factors
 See
 Trust Termination
   The Trusts continuing failure to timely file certain periodic reports with the SEC during the wind
up and liquidation of the Trust may pose significant risks to the Trusts business, which could
materially and adversely affect the Trust financial condition and results of operation and the
current and/or future value of the Net Profits Interests.
  6




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If natural gas and oil prices decline significantly, the Trusts cash flow from operations will
likely decline and the Trust may have to lower the cash distributions or may not be able to pay
distributions at all during the wind up and liquidation of the Trust.
  
    
    The domestic and foreign supply of and demand for oil and natural gas;
    
    The price and quantity of foreign imports of oil and natural gas;
    
    The level of consumer product demand;
    
    Weather conditions, including but not limited to, hurricanes in the Gulf
of Mexico, can adversely impact cash distributions received by the Trust. If the wells
drilled on the Underlying Properties and related infrastructure were to be damaged by
adverse weather conditions, cash flows distributed to Unitholders could be delayed
during the period in which damage to such assets were repaired. Additionally, costs
associated with such repairs not covered by insurance would reduce cash distributions
received by the Trust;
    
    Overall domestic and global economic conditions;
    
    Political and economic conditions and events in foreign oil and natural
gas producing countries, including embargoes, continued hostilities in the Middle East
and other sustained military campaigns, conditions in South America and Russia, and
acts of terrorism or sabotage;
    
    The ability of members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production controls;
    
    Technological advances affecting energy consumption;
    
    Domestic and foreign governmental regulations and taxation;
    
    The impact of energy conservation efforts;
    
    The capacity of natural gas pipelines and other transportation facilities
to the Trusts production; and
    
    The price and availability of alternative fuels.
  Trust expenses may have an adverse impact on the distributions to Unitholders during the wind up
and liquidation of the Trust.
  7




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The estimated reserve quantities in this report are based on many assumptions that may prove
to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions
will materially affect the quantities and present value of the Trusts reserves.
   As more Infill Wells are drilled, they could cause a reduction in amounts payable to the Trust or a
purchaser of the Net Profits Interests.
  The Trusts business is subject to operational risks that may not be fully insured, which, if they
were to occur, could adversely affect the Trusts financial condition or results of operations and,
as a result, the Trusts ability to pay distributions to Unitholders.
  8




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The Trust may be unable to compete effectively with larger companies, which may adversely affect
the Trusts ability to generate sufficient revenue and its ability to pay distributions to
Unitholders prior to the windup and liquidation of the Trust.
  The Trusts operations are subject to regulations which may limit the Trusts production of natural
gas or the price that the Trust receives for natural gas.
  If it is determined that the Trust is subject to the Texas margin tax, the Trustee may have to
withhold a disproportionate amount from future distributions to pay the tax liability.
 see
 Federal Regulation
  9




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State Regulation
  Because the Trust handles oil and natural gas petroleum products, the Trust may incur significant
costs and liabilities in the future resulting from a failure to comply with new or existing
environmental regulations or an accidental release of hazardous substances in the environment.
  Net Proceeds Attributable to the Robinsons Bend Field have declined significantly.
  10




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The market price for the Trusts Units may not reflect the value of the Net Profits Interests held
by the Trust.
  Financial information of the Trust is not prepared in accordance with GAAP.
  The Trust is dependent on certain service providers to provide various services to the Trust.
    Unitholders have limited voting rights.
  11




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 Description of the Underlying Properties
 Chalkley Field
 Robinsons Bend Field
 Cotton Valley Fields
 Austin Chalk Fields
 Oil and Natural Gas Reserves
  12




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Well Count and Acreage Summary
  Natural Gas Wells
    
    
    Oil WellsGross
    
    
    Net
    
    
    Gross
    
    
    NetChalkley Field
    
    
    6
    
    
    
    0.8
    
    
    
    
    
    
    
    Robinsons Bend Field
    
    
    426
    
    
    
    170.4
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    73
    
    
    
    25.4
    
    
    
    
    
    
    
    Austin Chalk Fields
    
    
    28
    
    
    
    4.7
    
    
    
    35
    
    
    
    5.9Total
    
    
    533
    
    
    
    201.3
    
    
    
    35
    
    
    
    5.9
  AcreageGross
    
    
    NetChalkley Field
    
    
    2,152
    
    
    
    348Robinsons Bend Field
    
    
    33,404
    
    
    
    14,288Cotton Valley Fields
    
    
    4,411
    
    
    
    2,606Austin Chalk Fields
    
    
    23,895
    
    
    
    4,042Total
    
    
    63,862
    
    
    
    21,284
 Drilling Activity
   13




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##### Table of Contents



Development Wells  Chalkley Field (a)Gross
    

    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2009
    
    0
    
    0
    
    0
    
    0
    
    0
    
    02008
    
    0
    
    0
    
    0
    
    0
    
    0
    
    02007
    
    1
    
    0
    
    1
    
    0.03
    
    0
    
    0.03
 Development Wells  Cotton Valley FieldsGross
    

    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2009
    
    0
    
    0
    
    0
    
    0.0
    
    0
    
    0.02008
    
    1
    
    0
    
    1
    
    0.2
    
    0
    
    0.22007
    
    2
    
    0
    
    2
    
    0.3
    
    0
    
    0.3
 Development Wells  Robinsons Bend Field (b)Gross
    

    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2009
    
    0
    
    0
    
    0
    
    0
    
    0
    
    02008
    
    3
    
    0
    
    3
    
    0.2
    
    0
    
    0.22007
    
    8
    
    0
    
    8
    
    1.2
    
    0
    
    1.2
 
 (a)
    
    The Trust has not received cash distributions with respect to the Infill Well drilled in
the Chalkley Field. As of December 31, 2009, costs and expenses exceeded gross revenues by
approximately $2.4 million (before interest). The Trust will receive no payments for distributions
with respect to the Chalkley Field Infill Well until the future proceeds exceed the sum of future
costs and expenses and the cumulative excess of such costs and expenses including interest.(b)
    
    The Trust has not received cash distributions with respect to the Infill Wells drilled in the
Robinsons Bend Field. As of December 31, 2009 (pertaining to sales through September 30, 2009),
costs and expenses exceeded gross revenues by approximately $1.6 million. The Trust will receive
no payments for distributions with respect to the Robinsons Bend Infill Wells until the future
proceeds exceed the sum of future costs and expenses and the cumulative excess of such costs and
expenses including interest.  Oil and Natural Gas Sales Prices and Production Costs
  Chalkley, Cotton Valley And Austin Chalk Fields2009
    
    
    2008
    
    
    2007Production:Natural Gas (MMcf)
    
    
    1,342
    
    
    
    1,544
    
    
    
    1,811Oil (Mbbl)
    
    
    15
    
    
    
    14
    
    
    
    15Weighted average lifting cost per Mcfe
    
    $
    1.31
    
    
    $
    0.92
    
    
    $
    1.15Weighted average taxes on production per Mcfe
    
    $
    0.33
    
    
    $
    0.47
    
    
    $
     0.39Weighted average sales price (a)Natural Gas ($/Mcf)
    
    $
    3.46
    
    
    $
    5.51
    
    
    $
    4.29Oil ($/Bbl)
    
    $
    48.11
    
    
    $
    95.11
    
    
    $
    57.51
 14




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##### Table of Contents



Robinsons Bend Field2009
    
    
    2008
    
    
    2007Production:Natural Gas (MMcf)
    
    
    1,530
    
    
    
    1,579
    
    
    
    1,667Oil (Mbbl)
    
    
    
    
    
    
    
    
    
    
    Weighted average lifting cost per Mcfe
    
    $
    4.49
    
    
    $
    4.19
    
    
    $
    3.59Weighted average taxes on production per Mcfe
    
    $
    0.23
    
    
    $
    0.47
    
    
    $
    0.34Weighted average sales price (a)Natural Gas ($/Mcf)
    
    $
    2.92
    
    
    $
    4.85
    
    
    $
    3.83Oil ($/Bbl)
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (a)
    
    Average sales prices are reflective of natural gas prices received by the Trust less
certain gathering, treating and transportation charges. 
 Item 3. Legal Proceedings
 See
 inter alia
  15




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Item 4. (Removed and Reserved)
 16




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##### Table of Contents



PART II
 
 Item 5. Market for Registrants Units, Related Unitholder Matters and Registrants Purchases of
Equity Securities
  CashHigh
    
    
    Low
    
    
    DistributionsFiscal Year Ended December 31, 2008:Quarter ended March 31, 2008
    
    $
    10.91
    
    
    $
    8.47
    
    
    $
    0.03Quarter ended June 30, 2008
    
    $
    12.65
    
    
    $
    6.57
    
    
    $
    0.00Quarter ended September 30, 2008
    
    $
    9.74
    
    
    $
    1.63
    
    
    $
    0.00Quarter ended December 31, 2008
    
    $
    4.18
    
    
    $
    1.01
    
    
    $
    0.00Fiscal Year Ended December 31, 2009:Quarter ended March 31, 2009
    
    $
    2.99
    
    
    $
    1.19
    
    
    $
    0.00Quarter ended June 30, 2009
    
    $
    4.80
    
    
    $
    1.44
    
    
    $
    0.35Quarter ended September 30, 2009
    
    $
    8.74
    
    
    $
    3.20
    
    
    $
    0.00Quarter ended December 31, 2009
    
    $
    7.35
    
    
    $
    4.36
    
    
    $
    0.10Interim Period:Quarter ended March 31, 2010
    
    $
    5.35
    
    
    $
    3.36
    
    
    $
    0.00Quarter ended June 30, 2010
    
    $
    5.48
    
    
    $
    3.75
    
    
    $
    0.00
 
 Item 6. Selected Financial Data
 Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Net profits income
    
    $
    2,516
    
    
    $
    6,217
    
    
    $
    4,842
    
    
    $
    7,796
    
    
    $
    5,818Distributable income
    
    $
    1,236
    
    
    $
    3,162
    
    
    $
    4,133
    
    
    $
    7,262
    
    
    $
    5,601Distributions declared
    
    $
    3,891
    
    
    $
    258
    
    
    $
    4,102
    
    
    $
    7,250
    
    
    $
    5,590Distributable income
per Unit
    
    $
    0.14
    
    
    $
    0.37
    
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65Cash Reserve per Unit
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Distributions per Unit
    
    $
    0.45
    
    
    $
    0.03
    
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65Total assets (at end of
period)
    
    $
    15,250
    
    
    $
    19,623
    
    
    $
    16,694
    
    
    $
    18,386
    
    
    $
    21,675
  17




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
 Discussion of Years Ended December 31, 2009, 2008, and 2007
  Bbls of Oil2009
    
    
    2008
    
    
    2007Chalkley Field
    
    
    2,906
    
    
    
    3,550
    
    
    
    4,027Robinsons Bend Field
    
    
    
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    1,560
    
    
    
    1,552
    
    
    
    1,855Austin Chalk Fields
    
    
    10,322
    
    
    
    9,069
    
    
    
    9,229Total
    
    
    14,788
    
    
    
    14,171
    
    
    
    15,111
 Mcf of Natural Gas2009
    
    
    2008
    
    
    2007Chalkley Field
    
    
    702,898
    
    
    
    822,474
    
    
    
    976,994Robinsons Bend Field
    
    
    1,529,997
    
    
    
    1,579,276
    
    
    
    1,666,553Cotton Valley Fields
    
    
    513,335
    
    
    
    580,232
    
    
    
    643,745Austin Chalk Fields
    
    
    125,887
    
    
    
    140,911
    
    
    
    190,591Total
    
    
    2,872,117
    
    
    
    3,122,893
    
    
    
    3,477,883
     18




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See
  19




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see
   Year Ended December 31,2009
    
    
    2008
    
    
    2007Chalkley, Cotton Valley and
    
    
    Robinsons Bend
    
    
    
    
    
    
    Chalkley, Cotton Valley
    
    
    Robinsons Bend
    
    
    
    
    
    
    Chalkley, Cotton Valley
    
    
    Robinsons BendAustin Chalk Fields
    
    
    Field
    
    
    Total
    
    
    and Austin Chalk Fields
    
    
    Field
    
    
    Total
    
    
    and Austin Chalk Fields
    
    
    Field
    
    
    TotalOil and natural gas revenues
    
    $
    5,356
    
    
    $
    4,472
    
    
    
    
    
    
    $
    9,846
    
    
    $
    7,662
    
    
    
    
    
    
    $
    8,649
    
    
    $
    6,391Direct operating expenses:Lease operating expenses
(including property tax)
    
    
    1,872
    
    
    
    6,877
    
    
    
    
    
    
    
    1,491
    
    
    
    6,619
    
    
    
    
    
    
    
    2,195
    
    
    
    5,986Severance tax
    
    
    474
    
    
    
    358
    
    
    
    
    
    
    
    771
    
    
    
    743
    
    
    
    
    
    
    
    741
    
    
    
    5682,346
    
    
    
    7,235
    
    
    
    
    
    
    
    2,262
    
    
    
    7,362
    
    
    
    
    
    
    
    2,936
    
    
    
    6,554Net proceeds before
capital expenditures
    
    
    3,010
    
    
    
    (2,763
    )
    
    
    
    
    
    
    7,584
    
    
    
    300
    
    
    
    
    
    
    
    5,713
    
    
    
    (163
    )Capital expenditures
    
    
    362
    
    
    
    1
    
    
    
    
    
    
    
    1,040
    
    
    
    4
    
    
    
    
    
    
    
    616
    
    
    
    1412,648
    
    
    
    (2,764
    )
    
    
    
    
    
    
    6,544
    
    
    
    296
    
    
    
    
    
    
    
    5,097
    
    
    
    (304
    )Cumulative Deficit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,648
    
    
    
    (2,764
    )
    
    
    
    
    
    
    6,544
    
    
    
    296
    
    
    
    
    
    
    
    5,097
    
    
    
    (304
    )Net profits percentage
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)Net profits income
    
    $
    2,516
    
    
    $
    
    
    
    $
    2,516
    
    
    $
    6,217
    
    
    $
    
    
    
    $
    6,217
    
    
    $
    4,842
    
    
    $
    
    
    
    $
    4,842
 
 (a)
    
    With respect to the Robinsons Bend Field, the Trust received no cash distributions during
each of the years ended December 31, 2009, 2008 and 2007 (pertaining to production during the
twelve months ended September 30, 2009, 2008 and 2007, respectively.) 20




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Critical Accounting Policies
 Reserve Estimates
   Modified Cash Basis
  
 Item 7a. Quantitative and Qualitative Disclosures About Market Risk
   21




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See
 22




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Item 8. Financial Statements and Supplementary Data
  PageReport of Independent Registered Public Accounting Firm
    
    
    24Statements of Assets, Liabilities and Trust Corpus at December 31, 2009 and 2008
    
    
    25Statements of Distributable Income for the Years Ended December 31, 2009, 2008 and 2007
    
    
    26Statements of Changes in Trust Corpus for the Years Ended December 31, 2009, 2008 and 2007
    
    
    27Notes to Financial Statements
    
    
    28
 23




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/ UHY LLPHouston, TexasAugust 25, 2010 24




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##### Table of Contents



December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCash
    
    $
    847
    
    
    $
    3,963Restricted cash
    
    
    1,288
    
    
    
    730Net profits interests in oil and natural gas properties (net of
accumulated amortization of $167,485 and $165,670 at
December 31, 2009 and 2008, respectively)
    
    
    13,115
    
    
    
    14,930$
    15,250
    
    
    $
    19,623LIABILITIES AND TRUST CORPUSTrust expense payable
    
    $
    2,076
    
    
    $
    1,979Trust corpus
    
    
    13,174
    
    
    
    17,644$
    15,250
    
    
    $
    19,623
 
 25




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##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007Net profits income
    
    $
    2,516
    
    
    $
    6,217
    
    
    $
    4,842Infill well net proceeds
    
    
    89
    
    
    
    161
    
    
    
    400Other income
    
    
    24
    
    
    
    37
    
    
    
    542,629
    
    
    
    6,415
    
    
    
    5,296General and administrative expenses
    
    
    1,393
    
    
    
    3,253
    
    
    
    1,163Distributable income
    
    $
    1,236
    
    
    $
    3,162
    
    
    $
    4,133Distributable income per Unit (8,600 Units)
    
    $
    0.14
    
    
    $
    0.37
    
    
    $
    0.48Distributions per Unit
    
    $
    0.45
    
    
    $
    0.03
    
    
    $
    0.48
 
 26




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Year Ended December 31,2009
    
    
    2008
    
    
    2007Trust corpus, beginning of year
    
    $
    17,644
    
    
    $
    16,449
    
    
    $
    18,164Amortization of Net Profits Interests
    
    
    (1,815
    )
    
    
    (1,709
    )
    
    
    (1,746
    )Distributable income
    
    
    1,236
    
    
    
    3,162
    
    
    
    4,133Distributions to Unitholders
    
    
    (3,891
    )
    
    
    (258
    )
    
    
    (4,102
    )Trust Corpus, end of year
    
    $
    13,174
    
    
    $
    17,644
    
    
    $
    16,449
 
 27




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See
 28




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
    
    Revenues are recognized in the period in which amounts are received by the Trust. Therefore, revenues recognized
during the years ended December 31, 2009, 2008 and 2007 are derived from oil and natural gas production sold during the
twelve-month periods ended September 30, 2009, 2008 and 2007, respectively. General and administrative expenses are
recognized on an accrual basis.
    
    Amortization of the Net Profits Interests is calculated on a unit-of-production basis and charged directly to Trust
corpus.
    
    Distributions to Unitholders are recorded when declared by the Trustee.
    
    An impairment loss is recognized when the net carrying value of the Net Profits Interests exceeds its fair market
value. No such impairment was recorded during the three years ended December 31, 2009.
 29




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
    
    The financial statements of the Trust differ from financial statements prepared in
accordance with GAAP because net profits income is not accrued in the period of production
and amortization of the Net Profits Interests is not charged against operating results.
    
    Restricted cash represents monies paid to the Trust by a working interest owner of the
Underlying Properties that may represent a potential overpayment pertaining to oil and
natural gas sales from certain Infill Wells during periods subsequent to the Trusts
termination.
    
    In May 2009, the FASB issued authoritative guidance on subsequent events. FASB ASC 855
establishes general standards of accounting for and disclosure of transactions and events
that occur after the balance sheet date but before financial statements are issued or
available to be issued. The guidance is set forth in topic 855 of the codification, and it
is effective for fiscal years and interim periods after June 15, 2009. Adoption of the
guidance in the second quarter of 2009 did not impact the trust financial position or
results of operation.
    
    At December 31, 2009, the Trust adopted the Securities and Exchange Commissions (SEC)
Modernization of Oil and Gas Reporting, as well as the conforming rule changes issued by
the Financial Accounting Standards Board. Upon adoption, the primary rule change that
impacted the Trusts year-end 2009 reserve estimates were those related to assumptions for
pricing. The SECs prior rules required proved reserve estimates to be calculated using
prices as of the end of the period and held constant over the life of the reserves. The
revised rules require reserve estimates to be calculated using an unweighted average of the
first-day-of-the-month price for the preceding 12-month period.
      30




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see
 see
  See
 31




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##### Table of Contents



Marketing Arrangements and Price Sharing
   See
  Gathering, Treating and Transportation Arrangements
  32




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##### Table of Contents



Operator Overhead Fees
  Administrative Services Agreements
     33




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Compensation of the Trustee and Transfer Agent
          34




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##### Table of Contents



Oil and Gas Reporting
   .
 2009
    
    
    2008
    
    
    2007Natural
    
    
    
    
    
    
    Natural
    
    
    
    
    
    
    NaturalDescription
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas(Bbls)
    
    
    (Mcf)
    
    
    (Bbls)
    
    
    (Mcf)
    
    
    (Bbls)
    
    
    (Mcf)Proved reserves at beginning of year
    
    
    37
    
    
    
    7,491
    
    
    
    48
    
    
    
    10,202
    
    
    
    42
    
    
    
    10,302Revisions
    
    
    (2
    )
    
    
    (2,381
    )
    
    
    (3
    )
    
    
    (1,710
    )
    
    
    15
    
    
    
    1,032Extensions and discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (7
    )
    
    
    (579
    )
    
    
    (8
    )
    
    
    (1,001
    )
    
    
    (9
    )
    
    
    (1,132
    )Proved reserves at end of year
    
    
    28
    
    
    
    4,531
    
    
    
    37
    
    
    
    7,491
    
    
    
    48
    
    
    
    10,202Proved developed reserves at beginning of year
    
    
    37
    
    
    
    7,491
    
    
    
    48
    
    
    
    10,202
    
    
    
    42
    
    
    
    10,273Proved developed reserves at end of year
    
    
    28
    
    
    
    4,531
    
    
    
    37
    
    
    
    7,491
    
    
    
    48
    
    
    
    10,202
 35




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##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007Future cash inflows
    
    $
    32,487
    
    
    $
    55,206
    
    
    $
    84,417Future costs and expenses
    
    
    (16,344
    )
    
    
    (22,702
    )
    
    
    (31,595
    )Net future cash flows
    
    
    16,143
    
    
    
    32,504
    
    
    
    52,822Discount at 10% for timing of cash flows
    
    
    (5,205
    )
    
    
    (12,090
    )
    
    
    (21,944
    )Present value of future net cash flows for proved reserves
    
    $
    10,938
    
    
    $
    20,414
    
    
    $
    30,878
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    20,414
    
    
    $
    30,878
    
    
    $
    26,376Sales of oil and natural gas produced, net of production costs
    
    
    (2,153
    )
    
    
    (6,286
    )
    
    
    (5,584
    )Accretion of discount
    
    
    2,041
    
    
    
    3,088
    
    
    
    2,638Extensions and discoveries
    
    
    0
    
    
    
    0
    
    
    
    0Revision of prior-year estimates, change in prices and other
    
    
    (9,364
    )
    
    
    (7,266
    )
    
    
    7,448Balance at end of year
    
    $
    10,938
    
    
    $
    20,414
    
    
    $
    30,878
  36




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DistributableNet Profits
    
    
    Distributable
    
    
    IncomeIncome
    
    
    Income
    
    
    Per UnitQuarter ended March 31, 2009
    
    $
    1,019
    
    
    $
    763
    
    
    $
    0.089Quarter ended June 30, 2009
    
    
    656
    
    
    
    264
    
    
    
    0.031Quarter ended September 30, 2009
    
    
    507
    
    
    
    189
    
    
    
    0.022Quarter ended December 31, 2009
    
    
    334
    
    
    
    20
    
    
    
    0.002$
    2,516
    
    
    $
    1,236
    
    
    $
    0.144Quarter ended March 31, 2008
    
    $
    1,484
    
    
    $
    686
    
    
    $
    0.080Quarter ended June 30, 2008
    
    
    1,582
    
    
    
    172
    
    
    
    0.020Quarter ended September 30, 2008
    
    
    1,655
    
    
    
    1,092
    
    
    
    0.127Quarter ended December 31, 2008
    
    
    1,496
    
    
    
    1,212
    
    
    
    0.141$
    6,217
    
    
    $
    3,162
    
    
    $
    0.368
    37




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Control over Financial Reporting.
  Report on Internal Control Over Financial Reporting.
    38




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Item 9B. Other Information
  39




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance .
    
 Item 11. Executive Compensation
  Ongoing Administrative Expenses.
 Compensation of the Trustee and Transfer Agent.
  Fees to Torch.
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Unitholders Matters
  40




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##### Table of Contents



Shares Beneficially OwnedName of Beneficial Owner and Address
    
    Units
    
    
    Percent of Class5% Unitholder: (1)Trust Venture Company, LLC (2)
Two Greenwich Plaza, First Floor
Greenwich, CT 06830
    
    
    6,502,762
    
    
    
    75.6
    %Trust Acquisition Company, LLC (2)
Two Greenwich Plaza, First Floor
Greenwich, CT 06830Silver Point Capital, L.P. (2)
Two Greenwich Plaza, First Floor
Greenwich, CT 06830Edward A. Mulé (2)
Two Greenwich Plaza, First Floor
Greenwich, CT 06830Robert J. OShea (2)
Two Greenwich Plaza, First Floor
Greenwich Plaza, First Floor
Greenwich, CT 06830
 
 (1)
    
    Based on Form 4 filed on April 30, 2008.(2)
    
    Trust Venture Company, LLC, Trust Acquisition Company, LLC, Silver Point Capital, L.P., Edward
A. Mule and Robert J. OShea are each a reporting person and member of a reporting group pursuant
to a Joint Filing Agreement dated as of July 6, 2007 for purposes of the Securities Exchange Act of
1934, as amended. 
 Item 13. Certain Relationships and Related Transactions
 Administrative Services Agreements
     41




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Marketing Arrangements and Price Sharing
    Gathering, Treating and Transportation Arrangements
   42




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
   2009
    
    
    2008Audit Fees
    
    $
    100,000
    
    
    $
    120,000Audit Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0$
    100,000
    
    
    $
    120,000
 43




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this report:
 1. Financial Statements
  
 2. Financial Statement Schedules
  3. Exhibits
 Exhibit
 Number Exhibit
  4.1
    -
    Form of Torch Energy Royalty Trust Agreement.*4.2
    -
    Form of Louisiana Trust Agreement.*4.3
    -
    Specimen Trust Unit Certificate.*4.4
    -
    Designation of Ancillary Trustee.*
  10.1
    -
    Purchase Agreement between TRC, Velasco and TEMI.*10.2
    -
    Gas Gathering Agreement between TEMI and Bahia Gas Gathering, Ltd.*10.3
    -
    Amendment to Gas Gathering Agreement.*10.4
    -
    Water Gathering and Disposal Agreement and First Amendment between Torch
Energy Associates, Ltd. and Velasco.*10.5
    -
    Form of Texas Conveyance.*10.6
    -
    Form of Louisiana Conveyance.*10.7
    -
    Form of Alabama Conveyance.*10.8
    -
    Standby Performance Agreement between Torch and the Trust.*10.9
    -
    Amendment to Water Gathering Contract.*10.10
    -
    First Amendment to Oil and Gas Purchase Contract (previously filed on form 10-Q for
the quarter ended September 30, 1994). *10.11
    -
    Second amendment to Water Gathering and Disposal Agreement (previously filed on Form
8-K on February 11, 2008).**
 44




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##### Table of Contents



23.1 -
    
    Consent of T.J. Smith & Company, Inc.23.2 -
    
    Consent of Netherland, Sewell and Associates, Inc.23.3 -
    
    Consent of Watkins Meegan LLC
  31.1 -
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1 -
    
    Certification of Wilmington Trust Company pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference from Registration Statements on Form S-1 of Torch Energy
Advisors Incorporated (Registration No. 33-68688) dated November 16, 1993.**
    
    Incorporated by reference from Form 8-K dated February 11, 2008. 45




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SIGNATURES
  TORCH ENERGY ROYALTY TRUSTBy:
    Wilmington Trust Company,not in its individual capacity butsolely as Trustee for the TrustBy:
    /s/ Bruce L. BissonBruce L. Bisson, Vice President   46