##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 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:
 Name of Each Exchange onTitle of each class
    
    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
 þ
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller
 reporting company)
Smaller reporting company o o þ




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##### 



PageNumberPART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    6Item 1B.
    
    Unresolved Staff Comments
    
    
    12Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    16Item 4.
    
    Submission of Matters to a Vote of Unitholders
    
    
    17PART IIItem 5.
    
    Market for Registrants Units and Related Unitholder Matters
    
    
    18Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7a.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 8.
    
    Financial Statements and Supplementary Data
    
    
    23Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    37Item 9A.
    
    Controls and Procedures
    
    
    37Item 9B.
    
    Other Information
    
    
    38PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    38Item 11.
    
    Executive Compensation
    
    
    38Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    39Item 13.
    
    Certain Relationships and Related Transactions
    
    
    40Item 14.
    
    Principal Accountant Fees and Services
    
    
    41PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    43
    
    Signatures
    
    
    45EX-23.1EX-23.2EX-23.3EX-31.1EX-32.1
  1




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PART I
 
 Item 1. Business
  General
    2




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3




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See also
 Marketing Arrangements
    Gathering, Treating and Transportation Arrangements
  4




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Net Profits Interests
   5




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Availability of Reports
  
 Item 1A. Risk Factors
 See
 Trust Termination
   6




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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.
   If 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 gas;
    
    The price and quantity of foreign imports of oil and 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 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;
 7




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
    
    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.
  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.
  8




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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.
  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.
  9




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Federal Regulation
   State Regulation
  Because the Trust handles oil and 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.
  10




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Net Proceeds Attributable to the Robinsons Bend Field have declined significantly.
   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.
  11




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Unitholders have limited voting rights.
  
 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
 12




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Oil and Gas Reserves
  13




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Well Count and Acreage Summary
  Gas Wells
    
    Oil WellsGross
    
    Net
    
    Gross
    
    NetChalkley Field
    
    
    6
    
    
    
    .8
    
    
    
    
    
    
    
    Robinsons Bend Field
    
    
    423
    
    
    
    170.2
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    72
    
    
    
    25.2
    
    
    
    
    
    
    
    Austin Chalk Fields
    
    
    33
    
    
    
    5.7
    
    
    
    42
    
    
    
    7.7Total
    
    
    534
    
    
    
    201.9
    
    
    
    42
    
    
    
    7.7
  AcreageGross
    
    NetChalkley Field
    
    
    2,152
    
    
    
    348Robinsons Bend Field
    
    
    33,404
    
    
    
    14,288Cotton Valley Fields
    
    
    4,411
    
    
    
    2,606Austin Chalk Fields
    
    
    28,364
    
    
    
    5,090Total
    
    
    68,331
    
    
    
    22,332
 14




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##### Table of Contents



Drilling Activity
   Development Wells  Chalkley Field (a)Gross
    
    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2007
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    0.03
    
    
    
    0
    
    
    
    0.032006
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    02005
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 Development Wells  Cotton Valley Fields (b)Gross
    
    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2007
    
    
    2
    
    
    
    0
    
    
    
    2
    
    
    
    0.3
    
    
    
    0
    
    
    
    0.32006
    
    
    4
    
    
    
    0
    
    
    
    4
    
    
    
    0.6
    
    
    
    0
    
    
    
    0.62005
    
    
    6
    
    
    
    0
    
    
    
    6
    
    
    
    0.7
    
    
    
    0
    
    
    
    0.7
 Development Wells  Robinsons Bend Field (c)Gross
    
    NetProductive
    
    Dry Holes
    
    Total
    
    Productive
    
    Dry Holes
    
    Total2007
    
    
    8
    
    
    
    0
    
    
    
    8
    
    
    
    1.2
    
    
    
    0
    
    
    
    1.22006
    
    
    12
    
    
    
    0
    
    
    
    12
    
    
    
    0.6
    
    
    
    0
    
    
    
    0.62005
    
    
    11
    
    
    
    0
    
    
    
    11
    
    
    
    0.7
    
    
    
    0
    
    
    
    0.7
 
 (a)
    
    The Trust has not received cash distributions with respect to the Infill Well drilled in the
Chalkley Field. As of December 31, 2007, costs and expenses exceeded gross revenues by
approximately $3.0 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 received cash distributions of approximately $0.4 million during 2007 with respect
to the Infill Wells drilled in the Cotton Valley Fields. As of December 31, 2007, costs and
expenses exceeded gross revenues by approximately $0.2 million. The Trust will receive no payments
for distributions with respect to the Cotton Valley Fields Infill Wells until the future proceeds
exceed the sum of future costs and expenses and the cumulative excess of such costs and expenses.(c)
    
    The Trust has not received cash distributions with respect to the Infill Wells drilled in the
Robinsons Bend Field. As of December 31, 2007, costs and expenses exceeded gross revenues by
approximately $723,000. 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.  15




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Oil and Gas Sales Prices and Production Costs
  Chalkley, Cotton ValleyAnd Austin Chalk Fields2007
    
    2006
    
    2005Production:Gas (MMcf)
    
    
    1,811
    
    
    
    1,955
    
    
    
    2,088Oil (Mbbl)
    
    
    15
    
    
    
    19
    
    
    
    22Weighted average lifting cost per Mcfe
    
    $
    1.15
    
    
    $
    1.01
    
    
    $
    .96Weighted average taxes on production per Mcfe
    
    $
    .39
    
    
    $
    .42
    
    
    $
    .35Weighted average sales price (a)
    
    $
    4.29
    
    
    $
    5.27
    
    
    $
    4.45Gas ($/Mcf)Oil ($/Bbl)
    
    $
    57.51
    
    
    $
    58.56
    
    
    $
    46.14
 Robinsons Bend Field2007
    
    2006
    
    2005Production:Gas (MMcf)
    
    
    1,667
    
    
    
    1,762
    
    
    
    1,826Oil (Mbbl)
    
    
    
    
    
    
    
    
    
    
    Weighted average lifting cost per Mcfe
    
    $
    3.59
    
    
    $
    3.43
    
    
    $
    3.22Weighted average taxes on production per Mcfe
    
    $
    .34
    
    
    $
    .45
    
    
    $
    .36Weighted average sales price (a)
    
    $
    3.83
    
    
    $
    4.71
    
    
    $
    3.98Gas ($/Mcf)Oil ($/Bbl)
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (a)
    
    Average sales prices are reflective of purchase prices paid by TEMI, pursuant to the Purchase
Contract, less certain gathering, treating and transportation charges. 
 Item 3. Legal Proceedings
 See
  16




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inter alia
 
 Item 4. Submission of Matters to a Vote of Unitholders
   17




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PART II
 
 Item 5. Market for Registrants Units and Related Unitholder Matters
  CashHigh
    
    Low
    
    DistributionsQuarter ended March 31, 2006
    
    $
    8.10
    
    
    $
    6.84
    
    
    $
    .35Quarter ended June 30, 2006
    
    $
    9.00
    
    
    $
    7.13
    
    
    $
    .25Quarter ended September 30, 2006
    
    $
    10.22
    
    
    $
    7.02
    
    
    $
    .14Quarter ended December 31, 2006
    
    $
    7.64
    
    
    $
    6.28
    
    
    $
    .10Quarter ended March 31, 2007
    
    $
    7.30
    
    
    $
    6.16
    
    
    $
    .10Quarter ended June 30, 2007
    
    $
    8.31
    
    
    $
    6.33
    
    
    $
    .10Quarter ended September 30, 2007
    
    $
    10.00
    
    
    $
    7.11
    
    
    $
    .12Quarter ended December 31, 2007
    
    $
    11.82
    
    
    $
    7.51
    
    
    $
    .16
  
 Item 6. Selected Financial Data
 Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003Net profits income
    
    $
    4,842
    
    
    $
    7,796
    
    
    $
    5,818
    
    
    $
    6,161
    
    
    $
    8,969Distributable income
    
    $
    4,133
    
    
    $
    7,262
    
    
    $
    5,601
    
    
    $
    5,657
    
    
    $
    8,036Distributions declared
    
    $
    4,102
    
    
    $
    7,250
    
    
    $
    5,590
    
    
    $
    5,728
    
    
    $
    7,989Distributable income
per Unit
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.66
    
    
    $
    0.93Distributions per Unit
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.67
    
    
    $
    0.93Total assets (at end of
period)
    
    $
    16,694
    
    
    $
    18,386
    
    
    $
    21,675
    
    
    $
    23,801
    
    
    $
    26,458
  18




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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, 2007, 2006, and 2005
  Bbls of Oil2007
    
    2006
    
    2005Chalkley Field
    
    
    4,027
    
    
    
    4,520
    
    
    
    5,155Robinsons Bend Field
    
    
    
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    1,855
    
    
    
    1,529
    
    
    
    1,852Austin Chalk Fields
    
    
    9,229
    
    
    
    12,787
    
    
    
    15,315Total
    
    
    15,111
    
    
    
    18,836
    
    
    
    22,322
 Mcf of Gas2007
    
    2006
    
    2005Chalkley Field
    
    
    976,994
    
    
    
    1,102,855
    
    
    
    1,226,513Robinsons Bend Field
    
    
    1,666,553
    
    
    
    1,761,754
    
    
    
    1,825,667Cotton Valley Fields
    
    
    643,745
    
    
    
    664,283
    
    
    
    684,434Austin Chalk Fields
    
    
    190,591
    
    
    
    187,423
    
    
    
    177,512Total
    
    
    3,477,883
    
    
    
    3,716,315
    
    
    
    3,914,126
    19




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See
      20




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Year Ended December 31,2007
    
    
    2006
    
    
    2005Chalkley,
    
    
    
    
    
    
    
    
    
    
    Chalkley,
    
    
    
    
    
    
    
    
    
    
    Chalkley,Cotton
    
    
    
    
    
    
    
    
    
    
    Cotton
    
    
    
    
    
    
    
    
    
    
    CottonValley and
    
    
    
    
    
    
    
    
    
    
    Valley and
    
    
    
    
    
    
    
    
    
    
    Valley andAustin
    
    
    Robinsons
    
    
    
    
    
    
    Austin
    
    
    Robinsons
    
    
    
    
    
    
    Austin
    
    
    RobinsonsChalk
    
    
    Bend
    
    
    
    
    
    
    Chalk
    
    
    Bend
    
    
    
    
    
    
    Chalk
    
    
    BendFields
    
    
    Field
    
    
    Total
    
    
    Fields
    
    
    Field
    
    
    Total
    
    
    Fields
    
    
    Field
    
    
    TotalOil and gas revenues
    
    $
    8,649
    
    
    $
    6,391
    
    
    
    
    
    
    $
    11,409
    
    
    $
    8,292
    
    
    
    
    
    
    $
    10,330
    
    
    $
    7,258Direct operating expenses:Lease operating expenses
(including property tax)
    
    
    2,195
    
    
    
    5,986
    
    
    
    
    
    
    
    2,078
    
    
    
    6,051
    
    
    
    
    
    
    
    2,126
    
    
    
    5,873Severance tax
    
    
    741
    
    
    
    568
    
    
    
    
    
    
    
    877
    
    
    
    797
    
    
    
    
    
    
    
    778
    
    
    
    6522,936
    
    
    
    6,554
    
    
    
    
    
    
    
    2,955
    
    
    
    6,848
    
    
    
    
    
    
    
    2,904
    
    
    
    6,525Net proceeds before
capital expenditures
    
    
    5,713
    
    
    
    (163
    )
    
    
    
    
    
    
    8,454
    
    
    
    1,444
    
    
    
    
    
    
    
    7,426
    
    
    
    733Capital expenditures
    
    
    616
    
    
    
    141
    
    
    
    
    
    
    
    929
    
    
    
    189
    
    
    
    
    
    
    
    1,302
    
    
    
    8765,097
    
    
    
    (304
    )
    
    
    
    
    
    
    7,525
    
    
    
    1,255
    
    
    
    
    
    
    
    6,124
    
    
    
    (143
    )Cumulative Deficit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (763
    )
    
    
    
    
    
    
    
    
    
    
    5,097
    
    
    
    (304
    )
    
    
    
    
    
    
    7,525
    
    
    
    492Net profits percentage
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)Net profits income
    
    $
    4,842
    
    
    $
    
    
    
    $
    4,842
    
    
    $
    7,149
    
    
    $
    647
    
    
    $
    7,796
    
    
    $
    5,818
    
    
    $
    
    
    
    $
    5,818
 
 (a)
    
    With respect to the Robinsons Bend Field, the Trust received no cash distributions during
each of the years ended December 31, 2005 and 2007 (pertaining to production during the twelve
months ended September 30, 2005 and 2007, respectively) and during the quarter ended September
30, 2006 (pertaining to production during the quarter ended June 30, 2006). 21




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Critical Accounting Policy
 Reserve Estimates
  Modified Cash Basis
  
 Item 7a. Quantitative and Qualitative Disclosures About Market Risk
  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, 2007 and 2006
    
    25Statements of Distributable Income for the Years Ended December 31, 2007, 2006 and 2005
    
    26Statements of Changes in Trust Corpus for the Years Ended December 31, 2007, 2006 and 2005
    
    27Notes to Financial Statements
    
    28
 23




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/ UHY LLPHouston, TexasDecember 29, 2008 24




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##### Table of Contents



December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCash
    
    $
    55
    
    
    $
    1Net profits interests in oil and gas properties (net of accumulated
amortization of $163,961 and $162,215 at December 31, 2007
and 2006, respectively)
    
    
    16,639
    
    
    
    18,385$
    16,694
    
    
    $
    18,386LIABILITIES AND TRUST CORPUSTrust expense payable
    
    $
    245
    
    
    $
    222Trust corpus
    
    
    16,449
    
    
    
    18,164$
    16,694
    
    
    $
    18,386
 
 25




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Net profits income
    
    $
    4,842
    
    
    $
    7,796
    
    
    $
    5,818Infill Well Net Proceeds
    
    
    400
    
    
    
    516
    
    
    
    708Other income
    
    
    54
    
    
    
    0
    
    
    
    05,296
    
    
    
    8,312
    
    
    
    6,526General and administrative expenses
    
    
    1,163
    
    
    
    965
    
    
    
    925Interest Expense
    
    
    
    
    
    
    85
    
    
    
    1,163
    
    
    
    1,050
    
    
    
    925Distributable income
    
    $
    4,133
    
    
    $
    7,262
    
    
    $
    5,601Distributable income per Unit (8,600 Units)
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65Distributions per Unit
    
    $
    0.48
    
    
    $
    0.84
    
    
    $
    0.65
 
 26




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Year Ended December 31,2007
    
    
    2006
    
    
    2005Trust corpus, beginning of year
    
    $
    18,164
    
    
    $
    21,441
    
    
    $
    23,556Amortization of Net Profits Interests
    
    
    (1,746
    )
    
    
    (3,289
    )
    
    
    (2,126
    )Distributable income
    
    
    4,133
    
    
    
    7,262
    
    
    
    5,601Distributions to Unitholders
    
    
    (4,102
    )
    
    
    (7,250
    )
    
    
    (5,590
    )Trust Corpus, end of year
    
    $
    16,449
    
    
    $
    18,164
    
    
    $
    21,441
 
 
 27




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Torch Energy Royalty Trust
Notes to Financial Statements
        28




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##### Table of Contents



Torch Energy Royalty Trust
Notes to Financial Statements
       
    
    Revenues are recognized in the period in which amounts are received by the Trust.
Therefore, revenues recognized during the years ended December 31, 2007, 2006 and 2005 are
derived from oil
 29




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##### Table of Contents



Torch Energy Royalty Trust
Notes to Financial Statements
 and gas production sold during the twelve-month periods ended September 30, 2007, 2006 and 2005,
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, 2007.
    
    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.
        30




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Torch Energy Royalty Trust
Notes to Financial Statements
      31




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##### Table of Contents



Torch Energy Royalty Trust
Notes to Financial Statements
 Marketing Arrangements
      Gathering, Treating and Transportation Arrangements
  32




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##### Table of Contents



Torch Energy Royalty Trust
Notes to Financial Statements
  Operator Overhead Fees
  Administrative Services Agreement
   Compensation of the Trustee and Transfer Agent
  33




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##### Table of Contents



Torch Energy Royalty Trust
Notes to Financial Statements
  
     2007
    
    2006
    
    2005Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    GasDescription
    
    (Mbbl)
    
    (MMcf)
    
    (Mbbl)
    
    (MMcf)
    
    (Mbbl)
    
    (MMcf)Proved reserves at beginning of year
    
    
    42
    
    
    
    10,302
    
    
    
    56
    
    
    
    19,164
    
    
    
    61
    
    
    
    14,055Revisions
    
    
    15
    
    
    
    1,032
    
    
    
    (5
    )
    
    
    (7,687
    )
    
    
    7
    
    
    
    6,300Extensions and discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    Production
    
    
    (9
    )
    
    
    (1,132
    )
    
    
    (9
    )
    
    
    (1,205
    )
    
    
    (12
    )
    
    
    (1,191
    )Proved reserves at end of year
    
    
    48
    
    
    
    10,202
    
    
    
    42
    
    
    
    10,302
    
    
    
    56
    
    
    
    19,164Proved developed reserves at beginning
of year
    
    
    42
    
    
    
    10,273
    
    
    
    54
    
    
    
    18,789
    
    
    
    55
    
    
    
    12,025Proved developed reserves at end of year
    
    
    48
    
    
    
    10,202
    
    
    
    42
    
    
    
    10,273
    
    
    
    54
    
    
    
    18,789
 34




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Torch Energy Royalty Trust
Notes to Financial Statements
   December 31,2007
    
    
    2006
    
    
    2005Future cash inflows
    
    $
    84,417
    
    
    $
    73,506
    
    
    $
    260,111Future costs and expenses
    
    
    (31,595
    )
    
    
    (28,941
    )
    
    
    (151,917
    )Net future cash flows
    
    
    52,822
    
    
    
    44,565
    
    
    
    108,194Discount at 10% for timing of cash flows
    
    
    (21,944
    )
    
    
    (18,189
    )
    
    
    (47,409
    )Present value of future net cash flows for proved reserves
    
    $
    30,878
    
    
    $
    26,376
    
    
    $
    60,785
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    26,376
    
    
    $
    60,785
    
    
    $
    38,987Sales of oil and gas produced, net of production costs
    
    
    (5,584
    )
    
    
    (5,843
    )
    
    
    (7,143
    )Accretion of discount
    
    
    2,638
    
    
    
    6,079
    
    
    
    3,899Extensions and discoveries
    
    
    0
    
    
    
    82
    
    
    
    Revision of prior-year estimates, change in prices
and other
    
    
    7,448
    
    
    
    (34,727
    )
    
    
    25,042Balance at end of year
    
    $
    30,878
    
    
    $
    26,376
    
    
    $
    60,785
  35




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Torch Energy Royalty Trust
Notes to Financial Statements
   DistributableNet Profits
    
    
    Distributable
    
    
    IncomeIncome
    
    
    Income
    
    
    Per UnitQuarter ended March 31, 2007
    
    $
    1,081
    
    
    $
    825
    
    
    $
    .10Quarter ended June 30, 2007
    
    
    1,158
    
    
    
    818
    
    
    
    .10Quarter ended September 30, 2007
    
    
    1,360
    
    
    
    1,082
    
    
    
    .12Quarter ended December 31, 2007
    
    
    1,243
    
    
    
    1,408
    
    
    
    .16$
    4,842
    
    
    $
    4,133
    
    
    $
    .48Quarter ended March 31, 2006
    
    $
    3,216
    
    
    $
    3,003
    
    
    $
    .35Quarter ended June 30, 2006
    
    
    2,014
    
    
    
    2,173
    
    
    
    .25Quarter ended September 30, 2006
    
    
    1,488
    
    
    
    1,248
    
    
    
    .15Quarter ended December 31, 2006
    
    
    1,078
    
    
    
    838
    
    
    
    .09$
    7,796
    
    
    $
    7,262
    
    
    $
    .84
 36




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##### Table of Contents



Torch Energy Royalty Trust
 
 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.
  Trustees Report on Internal Control Over Financial Reporting.
    37




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##### Table of Contents



Torch Energy Royalty Trust
    
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance .
    
 Item 11. Executive Compensation
  Ongoing Administrative Expenses.
 38




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##### Table of Contents



Torch Energy Royalty Trust
 Compensation of the Trustee and Transfer Agent.
  Fees to Torch.
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  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
    
    
    6,440,800
    
    
    
    74.9
    %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. Mule (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 Schedule 13 D/A filed on March 31, 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. 39




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##### Table of Contents



Torch Energy Royalty Trust
  (3)
    
    Based on Form 4 filed on April 1, 2008, Form 4 filed on April 3, 2008, Form 4 filed April 8,
2008, Form 4 filed April 10, 2008, Form 4 filed April 14, 2008, Form 4 filed April 16, 2008, Form 4
filed April 18, 2008, Form 4 filed April 22, 2008, Form 4 filed April 28, 2008 and Form 4 filed
April 30, 2008. 
 Item 13. Certain Relationships and Related Transactions
 Administrative Services Agreement
   Marketing Arrangement
   40




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##### Table of Contents



Torch Energy Royalty Trust
     
 Item 14. Principal Accountant Fees and Services
   41




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##### Table of Contents



Torch Energy Royalty Trust
 2007
    
    
    2006Audit Fees
    
    $
    121,000
    
    
    $
    111,000Audit Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0$
    121,000
    
    
    $
    111,000
 42




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##### Table of Contents



Torch Energy Royalty Trust
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this report:
 1.
    
    Financial Statements:Torch Energy Royalty Trust
      2.
    
    Financial Statement Schedules
  3.
    
    Exhibits
 Exhibit  Number Exhibit
 4.
    
    Instruments Defining the Rights of Security Holders, Including Indentures.
 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.
    
    Material Contracts.
 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).**
 43




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##### Table of Contents



Torch Energy Royalty Trust
 23.
    
    Consents of Experts and Counsel.
 23.1
    
    Consent of T.J. Smith & Company, Inc.23.2
    
    Consent of Netherland, Sewell and Associates, Inc.23.3
    
    Consent of Watkins, Meegan, Drury and Co. LLC
 31.
    
    Rule 13a-14(a)/15d-14(a) Certifications.
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 32.
    
    Section 1350 Certifications.
 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. 44




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##### Table of Contents



SIGNATURES
  TORCH ENERGY ROYALTY TRUSTBy:
    Wilmington Trust Company,not in its individual capacity but solely as Trustee for the Trust By:
    /s/ Bruce L. BissonBruce L. Bisson, Vice President   45