##### 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, 2006
 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
    
    74-6411424
(I.R.S. Employer Identification No.)Incorporation or Organization)
 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) 651-8775
 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
 þ o
 o
  o o þ
 o þ




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##### 



PageNumberPART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    5Item 1B.
    
    Unresolved Staff Comments
    
    
    9Item 2.
    
    Properties
    
    
    9Item 3.
    
    Legal Proceedings
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Unitholders
    
    
    13PART IIItem 5.
    
    Market for Registrants Units and Related
Unitholder Matters
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    14Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    15Item 7a.
    
    Quantitative and Qualitative Disclosures About
Market Risk
    
    
    18Item 8.
    
    Financial Statements and Supplementary Data
    
    
    19Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    31Item 9A.
    
    Controls and Procedures
    
    
    31Item 9B.
    
    Other Information
    
    
    31PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    32Item 11.
    
    Executive Compensation
    
    
    32Item 12.
    
    Security Ownership of Certain Beneficial Owners
and Management
    
    
    33Item 13.
    
    Certain Relationships and Related Transactions
    
    
    33Item 14.
    
    Principal Accountant Fees and Services
    
    
    35PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    36
    
    Signatures
    
    
    38Consent of T.J. Smith & Company, Inc.Netherland, Sewell and Associates, Inc.Rule 13a-14(a)/15d-14(a) CertificationsSection 1350 Certification
  1




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PART I
 
 Item 1. Business
  General
    2




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Marketing Arrangements
    3




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Gathering, Treating and Transportation Arrangements
  Net Profits Interests
   Availability of Reports
  4




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Item 1A. Risk Factors
  If oil and gas prices decline significantly for a prolonged period, the Trusts cash flow from
operations will decline and the Trust may have to lower the cash distributions or may not be able
to pay distributions at all.
  o
    
    The domestic and foreign supply of and demand for oil and gas;o
    
    The price and quantity of foreign imports of oil and gas;o
    
    The level of consumer product demand;o
    
    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 ;o
    
    Overall domestic and global economic conditions;o
    
    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;o
    
    The ability of members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production controls;o
    
    Technological advances affecting energy consumption;o
    
    Domestic and foreign governmental regulations and taxation;o
    
    The impact of energy conservation efforts;o
    
    The capacity of natural gas pipelines and other transportation facilities
to the Trusts production; ando
    
    The price and availability of alternative fuels.
  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.
  5




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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
  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.
  6




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##### Table of Contents



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.
  7




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Net
Proceeds Attributable to the Robinsons Bend Field have declined significantly.
   The market price for the Trust Units may not reflect the value of the Net Profits Interests held by
the Trust.
  If the Trust terminates there is no assurance that the Trustee can sell the Net Profits Interests
or the amount it will be sold for.
  8




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Financial information of the Trust is not prepared in accordance with GAAP.
  The Trust is dependent on Torch and its subsidiaries to provide administrative services to the
Trust.
  Unitholders have limited voting rights.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 Description of the Underlying Properties
 Chalkley Field
 Robinsons Bend Field
 9




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Cotton Valley Fields
 Austin Chalk Fields
 Oil and Gas Reserves
  10




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Well Count and Acreage Summary
  Gas Wells
    
    Oil WellsGross
    
    Net
    
    Gross
    
    NetChalkley Field
    
    
    4
    
    
    
    .6
    
    
    
    
    
    
    
    Robinsons Bend Field
    
    
    416
    
    
    
    169.3
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    70
    
    
    
    24.9
    
    
    
    
    
    
    
    Austin Chalk Fields
    
    
    31
    
    
    
    5.7
    
    
    
    43
    
    
    
    8.0Total
    
    
    521
    
    
    
    200.5
    
    
    
    43
    
    
    
    8.0
  AcreageGross
    
    NetChalkley Field
    
    
    2,152
    
    
    
    348Robinsons Bend Field
    
    
    33,404
    
    
    
    14,288Cotton Valley Fields
    
    
    4,411
    
    
    
    2,606Austin Chalk Fields
    
    
    28,508
    
    
    
    5,170Total
    
    
    68,475
    
    
    
    22,412
 11




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Drilling Activity
   Development Wells  Cotton Valley FieldsGross
    
    NetDry
    
    
    
    
    
    
    
    
    
    DryProductive
    
    Holes
    
    Total
    
    Productive
    
    Holes
    
    Total2006
    
    
    4
    
    
    
    0
    
    
    
    4
    
    
    
    0.6
    
    
    
    0
    
    
    
    .62005
    
    
    6
    
    
    
    0
    
    
    
    6
    
    
    
    0.7
    
    
    
    0
    
    
    
    0.72004
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Development Wells  Robinsons Bend Field (a)Gross
    
    NetDry
    
    
    
    
    
    
    
    
    
    DryProductive
    
    Holes
    
    Total
    
    Productive
    
    Holes
    
    Total2006
    
    
    12
    
    
    
    0
    
    
    
    12
    
    
    
    0.6
    
    
    
    0
    
    
    
    0.62005
    
    
    11
    
    
    
    0
    
    
    
    11
    
    
    
    0.7
    
    
    
    0
    
    
    
    0.72004
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 (a)
    
    The Trust has not received cash distributions with respect to the Infill Wells
drilled in the Robinsons Bend Field (Robinsons Bend Infill Wells). As of December
31, 2006, costs and expenses have exceeded gross revenues by approximately $858,000.
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.  12




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Oil and Gas Sales Prices and Production Costs
  Chalkley, Cotton ValleyAnd Austin Chalk Fields2006
    
    2005
    
    2004Production:Gas (MMcf)
    
    
    1,955
    
    
    
    2,088
    
    
    
    2,496Oil (Mbbl)
    
    
    19
    
    
    
    22
    
    
    
    25Weighted average lifting cost per Mcfe
    
    $
    1.01
    
    
    $
    .96
    
    
    $
    .77Weighted average taxes on production per Mcfe
    
    $
    .42
    
    
    $
    .35
    
    
    $
    .30Weighted average sales price (a)Gas ($/Mcf)
    
    $
    5.27
    
    
    $
    4.45
    
    
    $
    3.72Oil ($/Bbl)
    
    $
    58.56
    
    
    $
    46.14
    
    
    $
    30.58
 Robinsons Bend Field2006
    
    2005
    
    2004Production:Gas (MMcf)
    
    
    1,762
    
    
    
    1,826
    
    
    
    1,927Oil (Mbbl)
    
    
    
    
    
    
    
    
    
    
    Weighted average lifting cost per Mcfe
    
    $
    3.43
    
    
    $
    3.22
    
    
    $
    3.04Weighted average taxes on production per Mcfe
    
    $
    .45
    
    
    $
    .36
    
    
    $
    .27Weighted average sales price (a)Gas ($/Mcf)
    
    $
    4.71
    
    
    $
    3.98
    
    
    $
    3.25Oil ($/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
  
 Item 4. Submission of Matters to a Vote of Unitholders
  13




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PART II
 
 Item 5. Market for Registrants Units and Related Unitholder Matters
  CashHigh
    
    Low
    
    DistributionsQuarter ended March 31, 2005
    
    $
    8.11
    
    
    $
    6.45
    
    
    $
    .22Quarter ended June 30, 2005
    
    $
    8.15
    
    
    $
    6.13
    
    
    $
    .12Quarter ended September 30, 2005
    
    $
    7.20
    
    
    $
    6.60
    
    
    $
    .15Quarter ended December 31, 2005
    
    $
    7.23
    
    
    $
    6.44
    
    
    $
    .16Quarter 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
    
    
    $
    .10
  
 Item 6. Selected Financial Data
 Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Net profits income
    
    $
    7,796
    
    
    $
    5,818
    
    
    $
    6,161
    
    
    $
    8,969
    
    
    $
    9,357Distributable income
    
    $
    7,262
    
    
    $
    5,601
    
    
    $
    5,657
    
    
    $
    8,036
    
    
    $
    8,616Distributions declared
    
    $
    7,250
    
    
    $
    5,590
    
    
    $
    5,728
    
    
    $
    7,989
    
    
    $
    8,652Distributable income
per Unit
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.66
    
    
    $
    0.93
    
    
    $
    1.00Distributions per Unit
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.67
    
    
    $
    0.93
    
    
    $
    1.01Total assets (at end of
period)
    
    $
    18,386
    
    
    $
    21,675
    
    
    $
    23,801
    
    
    $
    26,458
    
    
    $
    31,265
  14




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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, 2006, 2005, and 2004
  Bbls of Oil2006
    
    2005
    
    2004Chalkley Field
    
    
    4,520
    
    
    
    5,155
    
    
    
    6,756Robinsons Bend Field
    
    
    
    
    
    
    
    
    
    
    Cotton Valley Fields
    
    
    1,529
    
    
    
    1,852
    
    
    
    2,077Austin Chalk Fields
    
    
    12,787
    
    
    
    15,315
    
    
    
    16,574Total
    
    
    18,836
    
    
    
    22,322
    
    
    
    25,407
 Mcf of Gas2006
    
    2005
    
    2004Chalkley Field
    
    
    1,102,855
    
    
    
    1,226,513
    
    
    
    1,514,308Robinsons Bend Field
    
    
    1,761,754
    
    
    
    1,825,667
    
    
    
    1,926,899Cotton Valley Fields
    
    
    664,283
    
    
    
    684,434
    
    
    
    836,987Austin Chalk Fields
    
    
    187,423
    
    
    
    177,512
    
    
    
    144,270Total
    
    
    3,716,315
    
    
    
    3,914,126
    
    
    
    4,422,464
    15




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16




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Year Ended December 31,2006
    
    
    2005
    
    
    2004Chalkley,
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    11,409
    
    
    $
    8,292
    
    
    
    
    
    
    $
    10,330
    
    
    $
    7,258
    
    
    
    
    
    
    $
    10,053
    
    
    $
    6,268Direct operating expenses:Lease operating expenses
(including property tax)
    
    
    2,078
    
    
    
    6,051
    
    
    
    
    
    
    
    2,126
    
    
    
    5,873
    
    
    
    
    
    
    
    2,035
    
    
    
    5,852Severance tax
    
    
    877
    
    
    
    797
    
    
    
    
    
    
    
    778
    
    
    
    652
    
    
    
    
    
    
    
    782
    
    
    
    5172,955
    
    
    
    6,848
    
    
    
    
    
    
    
    2,904
    
    
    
    6,525
    
    
    
    
    
    
    
    2,817
    
    
    
    6,369Net proceeds before
capital expenditures
    
    
    8,454
    
    
    
    1,444
    
    
    
    
    
    
    
    7,426
    
    
    
    733
    
    
    
    
    
    
    
    7,236
    
    
    
    (101
    )Capital expenditures
    
    
    929
    
    
    
    189
    
    
    
    
    
    
    
    1,302
    
    
    
    876
    
    
    
    
    
    
    
    751
    
    
    
    1367,525
    
    
    
    1,255
    
    
    
    
    
    
    
    6,124
    
    
    
    (143
    )
    
    
    
    
    
    
    6,485
    
    
    
    (237
    )Cumulative Deficit
    
    
    
    
    
    
    (763
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,525
    
    
    
    492Net profits percentage
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)
    
    
    
    
    
    
    95
    %
    
    
    
    (a)Net profits income
    
    $
    7,149
    
    
    $
    647
    
    
    $
    7,796
    
    
    $
    5,818
    
    
    $
    
    
    
    $
    5,818
    
    
    $
    6,161
    
    
    $
    
    
    
    $
    6,161
 
 (a)
    
    With respect to the Robinsons Bend Field, the Trust received no cash distributions during
each of the years ended December 31, 2004 and 2005 (pertaining to production during the twelve
months ended September 30, 2004 and 2005, respectively) and during the quarter ended September
30, 2006 (pertaining to production during the quarter ended June 30, 2006). During such
periods, the Robinsons Bend Field costs and expenses exceeded gross revenues. Termination of the Trust
  17




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Critical Accounting Policy
 Reserve Estimates
   Modified Cash Basis
  
 Item 7a. Quantitative and Qualitative Disclosures About Market Risk
   18




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Item 8. Financial Statements and Supplementary Data
  PageReport of Independent Registered Public Accounting Firm
    
    
    20Statements of Assets, Liabilities and Trust Corpus at December 31, 2006 and 2005
    
    
    21Statements of Distributable Income for the Years Ended December 31, 2006, 2005 and 2004
    
    
    22Statements of Changes in Trust Corpus for the Years Ended December 31, 2006, 2005 and
2004
    
    
    23Notes to Financial Statements
    
    
    24
 19




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      \s\ UHY LLP
 20




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Torch Energy Royalty Trust
 
 
 December 31,
    
    
    December 31,2006
    
    
    2005ASSETSCash
    
    $
    1
    
    
    $
    1Net profits interests in oil and gas properties (net of accumulated
amortization of $162,215 and $158,926 at December 31, 2006
and 2005, respectively)
    
    
    18,385
    
    
    
    21,674$
    18,386
    
    
    $
    21,675LIABILITIES AND TRUST CORPUSTrust expense payable
    
    $
    222
    
    
    $
    234Trust corpus
    
    
    18,164
    
    
    
    21,441$
    18,386
    
    
    $
    21,675
 
 21




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Torch Energy Royalty Trust
 
 
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Net profits income
    
    $
    7,796
    
    
    $
    5,818
    
    
    $
    6,161Infill Well Net Proceeds
    
    
    516
    
    
    
    708
    
    
    
    4438,312
    
    
    
    6,526
    
    
    
    6,604General and administrative expenses
    
    
    965
    
    
    
    925
    
    
    
    947Interest Expense
    
    
    85
    
    
    
    
    
    
    
    1,050
    
    
    
    925
    
    
    
    947Distributable income
    
    $
    7,262
    
    
    $
    5,601
    
    
    $
    5,657Distributable income per Unit (8,600 Units)
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.66Distributions per Unit
    
    $
    0.84
    
    
    $
    0.65
    
    
    $
    0.67
 
 22




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Torch Energy Royalty Trust
 
 
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Trust corpus, beginning of year
    
    $
    21,441
    
    
    $
    23,556
    
    
    $
    26,284Amortization of Net Profits Interests
    
    
    (3,289
    )
    
    
    (2,126
    )
    
    
    (2,657
    )Distributable income
    
    
    7,262
    
    
    
    5,601
    
    
    
    5,657Distributions to Unitholders
    
    
    (7,250
    )
    
    
    (5,590
    )
    
    
    (5,728
    )Trust Corpus, end of year
    
    $
    18,164
    
    
    $
    21,441
    
    
    $
    23,556
 
 23




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Torch Energy Royalty Trust
 
 Notes to Financial Statements
      24




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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, 2006, 2005 and 2004 are derived from oil and gas production sold during the
twelve-month periods ended September 30, 2006, 2005 and 2004, 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, 2006.
    
    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.
    25




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Torch Energy Royalty Trust
 Notes to Financial Statements
    Marketing Arrangements
    26




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Torch Energy Royalty Trust
 Notes to Financial Statements
   Gathering, Treating and Transportation Arrangements
  Operator Overhead Fees
  Administrative Services Agreement
  27




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Torch Energy Royalty Trust
 Notes to Financial Statements
  Compensation of the Trustee and Transfer Agent
        28




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Torch Energy Royalty Trust
 Notes to Financial Statements
  Description
    
    2006
    
    2005
    
    2004Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas(Mbbl)
    
    (MMcf)
    
    (Mbbl)
    
    (MMcf)
    
    (Mbbl)
    
    (MMcf)Proved reserves at beginning of year
    
    
    56
    
    
    
    19,164
    
    
    
    61
    
    
    
    14,055
    
    
    
    67
    
    
    
    14,079Revisions
    
    
    (5
    )
    
    
    (7,687
    )
    
    
    7
    
    
    
    6,300
    
    
    
    9
    
    
    
    1,568Extensions and discoveries
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (9
    )
    
    
    (1,205
    )
    
    
    (12
    )
    
    
    (1,191
    )
    
    
    (15
    )
    
    
    (1,592
    )Proved reserves at end of year
    
    
    42
    
    
    
    10,302
    
    
    
    56
    
    
    
    19,164
    
    
    
    61
    
    
    
    14,055Proved developed reserves at beginning
of year
    
    
    54
    
    
    
    18,789
    
    
    
    55
    
    
    
    12,025
    
    
    
    61
    
    
    
    12,022Proved developed reserves at end of year
    
    
    42
    
    
    
    10,273
    
    
    
    54
    
    
    
    18,789
    
    
    
    55
    
    
    
    12,025
   December 31,2006
    
    
    2005
    
    
    2004Future cash inflows
    
    $
    73,506
    
    
    $
    260,111
    
    
    $
    92,844Future costs and expenses
    
    
    (28,941
    )
    
    
    (151,917
    )
    
    
    (31,965
    )Net future cash flows
    
    
    44,565
    
    
    
    108,194
    
    
    
    60,879Discount at 10% for timing of cash flows
    
    
    (18,189
    )
    
    
    (47,409
    )
    
    
    (21,892
    )Present value of future net cash flows for proved reserves
    
    $
    26,376
    
    
    $
    60,785
    
    
    $
    38,987
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Balance at beginning of year
    
    $
    60,785
    
    
    $
    38,987
    
    
    $
    37,172Sales of oil and gas produced, net of production costs
    
    
    (5,843
    )
    
    
    (7,143
    )
    
    
    (7,476
    )Accretion of discount
    
    
    6,079
    
    
    
    3,899
    
    
    
    3,717Extensions and discoveries
    
    
    82
    
    
    
    
    
    
    
    Revision of prior-year estimates, change in prices
and other
    
    
    (34,727
    )
    
    
    25,042
    
    
    
    5,574Balance at end of year
    
    $
    26,376
    
    
    $
    60,785
    
    
    $
    38,987
  29




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##### Table of Contents



Torch Energy Royalty Trust
 Notes to Financial Statements
   DistributableNet Profits
    
    
    Distributable
    
    
    IncomeIncome
    
    
    Income
    
    
    Per UnitQuarter 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
    
    
    $
    .84Quarter ended March 31, 2005
    
    $
    1,837
    
    
    $
    1,889
    
    
    $
    .22Quarter ended June 30, 2005
    
    
    1,110
    
    
    
    1,025
    
    
    
    .12Quarter ended September 30, 2005
    
    
    1,482
    
    
    
    1,290
    
    
    
    .15Quarter ended December 31, 2005
    
    
    1,389
    
    
    
    1,397
    
    
    
    .16$
    5,818
    
    
    $
    5,601
    
    
    $
    .65
 30




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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
   
 Item 9B. Other Information
  31




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##### Table of Contents



Torch Energy Royalty Trust
 
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
 Compensation Discussion and Analysis
   
 Item 11. Executive Compensation
  Ongoing Administrative Expenses.
 Compensation of the Trustee and Transfer Agent.
  Fees to Torch.
 32




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##### Table of Contents



Torch Energy Royalty Trust
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  Shares Beneficially OwnedName of Beneficial Owner and Address
    
    Units
    
    Percent of Class5% Unitholder:Fairchild Energy Investment Co. LLC (1)
    
    
    764,100
    
    
    
    8.88
    %19800 MacArthur Boulevard, Suite 700

Irvine, Califormia 92612
 
 (1)
    
    Based on Schedule 13 D/A filed on February 7, 2005. 
 Item 13. Certain Relationships and Related Transactions
 Administrative Services Agreement
   Marketing Arrangement
   33




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##### Table of Contents



Torch Energy Royalty Trust
     34




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##### Table of Contents



Torch Energy Royalty Trust
 
 Item 14. Principal Accountant Fees and Services
   2006
    
    
    2005Audit
Fees
    
    $
    111,000
    
    
    $
    113,579Audit Related
Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0$
    111,000
    
    
    $
    113,579
 35




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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
 Financial statement schedules are omitted because of the absence of conditions under which they
are required or because the required information is included in the financial statements and
notes thereto.
 3.
    
    Exhibits
 ExhibitNumber 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 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). *
 23.
    
    Consents of Experts and Counsel.
 23.1 
    
    Consent of T.J. Smith & Company, Inc.
 36




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##### Table of Contents



Torch Energy Royalty Trust
 23.2
    
    - Netherland, Sewell and Associates, Inc.
 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.
 37




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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 TrustBy:
    
    /s/ Bruce L. Bisson

Bruce L. Bisson, Vice President




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##### Table of Contents



Torch Energy Royalty Trust
 ExhibitNumber 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 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). *
 23.
    
    Consents of Experts and Counsel.
 23.1 
    
    Consent of T.J. Smith & Company, Inc.
 23.2 
    
    Netherland, Sewell and Associates, Inc.
 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.