SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


[ü]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~ March 3031, ~~2010~~ 2011


[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-8518

LL&E ROYALTY TRUST

(Exact name of registrant as specified in its charter)

Texas		76-6007940
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
The Bank of New York Mellon Trust Company, N.A., Trustee Global Corporate Trust 919 Congress Avenue Austin, Texas (Address of principal executive offices)		78701 (Zip Code)

Registrant’s telephone number, including area code: (800) 852-1422

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ü

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer	Accelerated Filer	Non-Accelerated Filer	Smaller reporting company ü

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ü

At ~~August~~October 120, 2011, 18,991,304 Units of Beneficial ~~Interest~~ Interest in the registrant were outstanding.

TABLE OF CONTENTS

	Page
Special Note		2
Part I. Financial Information		43
Item 1. Financial Statements:		4
Item 1. Financial Statements		3
Presentation of Financial Information		43
Statements of Cash Earnings and Distributions		54
Statements of Assets, Liabilities and Trust Corpus		54
Statements of Changes in Trust Corpus		54
Notes to Financial Statements		65
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2314
Item 3. Quantitative and Qualitative Disclosures about Market Risk		3925
Item 4. Controls and Procedures		3925
Part II. Other Information		4127
Item 1A. Risk Factors		4127
Item 6. Exhibits		4127
Signature		4228
EX-31
EX-32

-1-

Special Note

LL&E Royalty Trust is(the ~~concurrently~~“Trust”) ~~filing~~filed its ~~quarterly~~2009 ~~reports~~and ~~on Form 10-Q for~~2010 ~~the~~quarterly ~~first,~~and ~~second~~annual ~~and~~reports ~~third~~on ~~quarters~~August 19, of2011. The ~~2009~~Trust ~~and~~is ~~2010~~now ~~and~~ concurrently filing its ~~annual~~quarterly reports on Form 10-KQ for the ~~years~~first ~~ended December 31, 2009~~ and ~~December 31, 2010~~second ~~(collectively,~~quarters ~~the~~of ~~“Delayed Filings”)~~2011. ~~These reports~~The ~~were delayed due to the previously reported difficulties the~~ Trust ~~encountered~~was ~~with the calculation of the Jay Field~~unable ~~royalties furnished~~ to ~~the~~prepare ~~Trust~~its byfinancial ~~Quantum~~statements ~~Resources~~for ~~Management LLC~~these ~~(“Quantum”),~~filings ~~which~~until ~~is the operator of the Jay~~it ~~Field~~completed ~~and~~ the ~~owner~~2009 ofand ~~the~~2010 ~~working~~filings. ~~interest~~Please ~~owner~~see ~~from which~~ the Trust’s ~~royalty interest was created. You should review all~~ ofannual ~~the~~report ~~Delayed Filings concurrently, and should not rely~~ on ~~any~~ ofForm 10-K for the ~~Delayed~~year ~~Filings~~ended ~~without~~December 31, ~~having~~2010 ~~reviewed~~for ~~the most recent~~additional ~~filings made by the Trust~~information.

As previously disclosed, the Trustee engaged an independent joint interest auditing firm (the “Consultant”), to review Quantum’s computation of the amounts payable to the Trust with respect to its interest in the Jay Field from the time of the sale by The Louisiana Land and Exploration Company (“LL&E”) of its working interest to Quantum Resources Management LLC in 2007 through August 2008 (the “First Review Period”). Also as previously disclosed, the Consultant completed its review of the First Review Period and Quantum and the Trustee reached agreement on the issues the Consultant had raised relating to the computation of expenses properly chargeable in the calculation of amounts payable to the Trust for the First Review Period.

Also as previously disclosed, the Trustee subsequently engaged the Consultant to review the computation of the amounts payable to the Trust with respect to its interest in the Jay Field for the production months September 2008 through March 2010 (the “Second Review Period”). The Consultant concluded its review of the Second Review Period, and Quantum and the Trustee resolved all significant issues raised by the Consultant.

As previously disclosed in the Trust’s filings, the Trust is now required by the terms of the Trust Agreement to sell its assets and to liquidate. As previously disclosed, the Trustee engaged Stifel, Nicolaus & Company, Incorporated, a nationally-recognized investment banking firm (the “Financial Advisor”) to market the Trust’s assets in anticipation of a sale in accordance with the terms of the Trust Agreement. The Financial Advisor marketed the Trust’s assets and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the assets in accordance with the terms of the Trust Agreement. However, as previously announced, in November 2010, the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan. Mr. Beckett’s Complaint seeks a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also makes a number of other allegations and seeks removal of the Trustee and other relief.

-2-

The Trustee has been requested by a holder of more than 10% of the Units to call a meeting of the Unitholders for the purpose of voting to remove The Bank of New York Mellon Trust Company, N.A. as Trustee and to appoint a successor trustee of the Trust. The Trustee called the meeting and filed proxy materials with the SEC. On August 9, 2011 the proposed successor informed the Trustee that it was no longer willing to serve as successor trustee. The meeting was convened as scheduled on August 12, 2011, but was adjourned until August 24, 2011 as a result of the withdrawal of the successor. In connection with the calling of the meeting, the parties to the Beckett lawsuit entered into a settlement agreement as described in this report.

Additional information regarding the status of the Beckett lawsuit, the status of the sale of the Trust’s assets, the computation of the Jay Field Royalties and other matters is included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010.

-3-

PART I


Item 1.	*Financial Statements.*

LL&E ROYALTY TRUST

Presentation of Financial Information

The accompanying unaudited financial statements of LL&E Royalty Trust (~~the “~~Trust”) have been prepared in accordance with the instructions to Form 10-Q. The financial statements were prepared on the basis of cash receipts and disbursements and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America. The information reflects all adjustments which, in the opinion of the Trustee, are necessary for a fair presentation of the results for the interim periods presented. The financial information should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, ~~2009 as well as the Trust’s Annual Report on Form 10-K for the year ended December 31,~~ 2010. The cash earnings and distributions for the three ~~and nine~~ months ended ~~September~~ March 3031, ~~2010~~2011 are not necessarily indicative of the results to be expected for the ~~year 2010. Please see the Annual~~ ~~Report on Form 10-K for the~~ year ~~ended~~ending December 31, ~~2010~~2011.

-43-

LL&E ROYALTY TRUST

Statements of Cash Earnings and Distributions

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2010			2009			2010			2009
	2011			2010
Royalty revenues	$	50—		$	~~225~~9,~~534~~199		$	~~233,974~~		$	~~795,026~~
Trust administrative expenses		(~~236~~7,~~276~~170	)		(~~226~~413,~~574~~903	)		~~(675,492~~	)		~~(794,025~~	)
Cash earnings (deficit)		(236,226	)		(1,040	)		(441,518	)		1,001
Cash losses		(7,170	)		(404,704	)
Changes in undistributed cash		~~236~~7,~~226~~170			1404,~~040~~704			~~441,518~~			~~(1,001~~	)
Cash distributions	$	—		$	—		$	—		$	—
Cash distributions per Unit	$	—0.0000		$	—0.0000		$	—		$	—
Units outstanding		18,991,304			18,991,304			~~18,991,304~~			~~18,991,304~~

Statements of Assets, Liabilities and Trust Corpus

(Unaudited)

	September 30,			December 31,
	March 31,			December 31,
	2010			2009
	2011			2010
ASSETS
Cash	$	3557,~~223~~307		$	3564,~~741~~477
Net overriding royalty interests in productive oil and gas properties		76,282,000			76,282,000
Less: accumulated amortization		(76,282,000	)		(76,282,000	)
Less accumulated amortization		(76,282,000	)		(76,282,000	)
Total assets	$	3557,~~223~~307		$	3564,~~741~~477
LIABILITIES AND TRUST CORPUS
Advances payable	$	~~441~~1,~~000~~144,310		$	—1,144,310
Trust Corpus (18,991,304 Units of Beneficial Interest authorized, issued and outstanding)		(~~437~~587,~~777~~003	)		3(579,~~741~~833	)
Contingencies (note 7)
Total liabilities and trust corpus	$	3,223		$	3,741
Total liabilities and Trust Corpus	$	557,307		$	564,477

Statements of Changes in Trust Corpus

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2010			2009
	2011			2010
Trust Corpus, beginning of period (note 2)	$	3,741		$	62
Trust Corpus, beginning of period (note 4)	$	(579,833	)	$	3,741
Cash earnings (deficit)		(441,518	)		1,001
Cash losses		(7,170	)		(404,704	)
Cash distributions		—			—
Amortization of royalty interest (note 2)		—			—
Amortization of royalty interest (note 4)		—			—
Trust Corpus, end of period	$	(~~437~~587,~~777~~003	)	$	1(400,~~063~~963	)

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

-54-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

~~September~~March 3031, ~~2010~~2011


(1)	Formation of the Trust

On June 28, 1983, The Louisiana Land and Exploration Company (herein Working Interest Owner or Company) created LL&E Royalty Trust (Trust) and distributed Units of Beneficial Interest (Units) in the Trust to the holders of record of capital stock of the Company on the basis of one Unit for each two shares of capital stock held on June 22, 1983. On October 22, 1997, the shareholders of the Company approved a definitive agreement to merge with Burlington Resources Inc. (BR). Effective on that date, the Company became a wholly owned subsidiary of BR. The merger has had no significant effects on the Trust. On March 31, 2006, ~~Conoco~~ ~~Phillips~~ConocoPhillips acquired BR via merger into Cello Acquisition Corp., a wholly owned subsidiary of ConocoPhillips. The surviving entity of the merger was Cello Acquisition Corp., which changed its name to Burlington Resources Inc. (New BR) Consequently, New BR (including the Company) is a wholly owned subsidiary of ConocoPhillips. The merger has had no significant effects on the Trust. In December 2006, the Company, as working interest owner, and ExxonMobil, as the operator of the Jay Field, sold their respective interests in the Jay Field properties located in Florida and Alabama to Quantum Resource Management LLC (“Quantum”). Quantum began operating the Jay Field properties in April 2007. As used in this report, the terms “Working Interest Owner” and “Working ~~Interest~~ Interest Owners” refer to The Louisiana Land and Exploration Company for the South Pass 89 and Offshore Louisiana properties and, after its December 2006 acquisition of the Jay Field interest, Quantum, for the Jay Field properties.

Upon creation of the Trust, the Company conveyed to the Trust (a) net overriding royalty interests (Overriding Royalties), which are equivalent to net profits interests, in certain productive oil and gas properties located in Alabama, Florida and in federal waters offshore Louisiana (Productive Properties) and (b) 3 percent royalty interests (Fee Lands Royalties) in approximately 400,000 acres of the Company’s then unleased, undeveloped south Louisiana fee lands (Fee Lands). The Overriding Royalties and the Fee Lands Royalties are referred to collectively as the “Royalties.” Title to the Royalties is held by a partnership (Partnership) of which the Trust and the Company are the only partners, holding 99 percent and 1 percent interests, respectively.

The Trust is passive, with The Bank of New York Mellon Trust Company, N.A., (the Trustee), having only such powers as are necessary for the collection and distribution of revenues resulting from the Royalties, the payment of Trust liabilities and the conservation and protection of the Trust estate. The Units ~~were listed on the New York Stock Exchange (NYSE SYMBOL — LRT) through November 19, 2009 and~~ are ~~now~~ traded over the counter under the symbol LRTR.

The accompanying financial statements should be read in conjunction with the Trust’s ~~most recent~~ Annual ~~Reports~~Report on Form 10-K for the year ended December 31, 2010.

Termination of the Trust and Recent Developments

The Trust Agreement provides that the Trust will terminate in the event that the net revenues fall below $5,000,000 for two successive years (the “Termination Threshold”). Net revenues are calculated as royalty revenues after administrative expenses of the Trust and as if the Trust had received its pro rata portion of any amounts being

-65-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

withheld by the Working Interest Owners or the Partnership under escrow arrangements or to make refund payments pursuant to the Conveyances (the Trust’s pro rata portion of escrowed amounts relating to the future dismantlement of platforms are included in the net revenue calculation for this purpose).

Net revenues to the Trust for the years ended December 31, 2007 and 2006 calculated as described above, were approximately $1,600,000 and $2,100,000, respectively. Consequently, the Trust is required to terminate and is required to sell the assets of the Trust for cash by means of a public auction. After paying or making provision for all actual and contingent liabilities of the Trust, including fees of the Trustee, the Trustee will distribute any remaining cash as promptly as practicable. Despite the termination of the Trust;, the Trustee is continuing to act as Trustee for purposes of liquidating and winding up the affairs of the Trust. The Trustee does not expect to make any further monthly distributions to Unit holders in the interim period prior to any distribution resulting from the sale of the Trust’s assets. See “Management’s Discussion and Analysis.”

The Trustee has retained Stifel, Nicolaus & Company, Incorporated (“Stifel Nicolaus”), a nationally recognized investment banking firm, to market the Trust’s assets. However, as announced by the Trustee on October 22, 2008, the Trustee previously determined that, in light of market conditions at that time, it was in the best interests of the Trust unit holders to postpone the sale of the Trust’s assets for an indefinite period of time. The Trustee recommenced the marketing efforts in 2010. The Financial Advisor marketed the Trust’s assets and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the assets in accordance with the terms of the Trust Agreement. However, as previously announced, in November 2010 the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan. Mr. Beckett’s Complaint seeks a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also makes a number of other allegations and seeks removal of the Trustee and other relief.

OnAs ~~July 7,~~a ~~2011,~~result ~~Mr.~~ of the Beckett ~~and~~lawsuit, certain of the ~~Trust~~bidders ~~entered~~who ~~into~~had asubmitted ~~settlement~~preliminary ~~agreement~~indications ~~pursuant~~of tointerest ~~which~~in ~~Mr. Beckett~~purchasing ~~agreed~~the toTrust’s ~~dismiss~~remaining ~~his~~assets ~~lawsuit~~indicated that they were unwilling to proceed with ~~prejudice~~the ~~within~~purchase ~~ten~~of ~~days~~the Jay Field interest ~~after~~from the Trust ~~holds~~until athe ~~meeting~~Beckett oflawsuit ~~the~~was ~~Unit~~resolved. Consequently, ~~holders~~as ~~for~~previously disclosed in the Trust’s public ~~purpose~~filings, ofthe ~~voting~~Trustee onsuspended athe ~~proposal~~sale toprocess ~~remove~~pending a resolution of the ~~Trustee~~lawsuit. ~~and~~On toMarch 4, 2011 the Court ~~appoint~~entered a ~~successor~~stipulated ~~trustee~~order ofin which the Trust, ~~provided~~voluntarily ~~that notice~~agreed ofthat the ~~meeting~~Trust iswould ~~mailed~~not bysell ~~August 1,~~any ~~2011~~assets ~~and~~of the ~~meeting~~Trust until at ~~occurs~~least bysuch ~~September 1,~~time ~~2011.~~as ~~Notice~~the ofCourt ~~the~~entered ~~meeting~~an ~~was~~order dismissing or ~~mailed~~transferring ~~prior~~the tocase ~~August 1,~~or ~~2011,~~preliminarily ~~and~~enjoining the ~~meeting~~sale ~~was~~of the ~~convened~~assets. onThe ~~August 12,~~Trustee ~~2011.~~filed ~~Because~~a ~~the~~Motion ~~proposed~~to ~~successor~~Dismiss for Failure to ~~trustee~~Join ~~withdrew~~Required ~~its~~Parties, ~~consent~~or, in the Alternative, to ~~serve~~Transfer ~~shortly~~Venue with ~~prior~~the toCourt seeking dismissal of the suit ~~meeting,~~and/or transfer of the ~~meeting~~suit ~~has~~to ~~been~~the ~~adjourned~~United States ~~until~~District ~~August 24,~~Court ~~2011~~for the Western District of Texas.

~~The~~On ~~Trust~~July ~~Agreement~~7, ~~provides~~2011, ~~that~~Mr. Beckett ifand ~~any~~the ~~asset~~Trust ~~required to~~entered beinto ~~sold~~a ~~has~~settlement ~~not~~agreement ~~been~~pursuant ~~sold~~to bywhich ~~December~~Mr. ~~31, 2010, the Trustee~~Beckett isagreed to ~~cause~~dismiss ~~the~~his ~~asset~~lawsuit towith beprejudice ~~sold~~within atten ~~public auction to the~~days ~~highest~~after ~~cash~~the ~~bidder.~~Trust ~~Consequently,~~held ~~unless~~a ~~removed~~meeting orof ~~prevented from doing so by~~ the ~~Beckett~~Unitholders ~~lawsuit~~for ~~or otherwise,~~ the ~~Trustee~~ ~~will~~purpose ~~mail notice~~ of aappointing ~~public~~Premier ~~auction~~Bank & toTrust, ~~all Unit holders at~~National ~~least~~Association, ~~30 days~~as ~~prior~~successor totrustee, anprovided ~~such~~that ~~auction~~notice inof ~~accordance with~~the ~~the~~Meeting ~~Trust Agreement.~~was Nomailed ~~approval~~by ofAugust 1, ~~the~~2011 ~~Unit~~and ~~holders~~the ~~will~~Meeting beoccurred ~~required~~by inSeptember 1, ~~connection~~2011. ~~with~~The ~~the~~notice ~~sale~~ of the ~~Trust’s~~meeting ~~assets.~~

-76-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

Asto ofappoint ~~September 30,~~Premier ~~2010,~~was ~~the~~mailed ~~Trust~~by ~~had $3~~August 1,~~223~~ in2011 ~~cash reserved for Trust expenses~~ and ~~unpaid invoices for administrative services totaling approximately $566,311. Based on current general and administrative expenditures, in~~ the ~~absence~~meeting ~~of Royalty Revenues the Trustee expects that it will be required~~ to ~~borrow~~appoint ~~money~~Premier inoccurred ~~accordance~~by ~~with the Trust~~September ~~Agreement to fund future Trust expenses. However~~1, ~~no assurance can be given that the Trustee will be able to borrow money on terms the Trustee considers reasonable or at all~~2011. ~~The~~ ~~Trust Agreement permits~~However, ~~but~~Premier ~~does~~refused ~~not~~to ~~require,~~accept ~~The~~its ~~Bank of New York Mellon Trust Company~~appointment, ~~N.A. or an affiliate to lend~~and ~~funds to the Trustee~~Mr. Beckett Inhas ~~the~~asserted ~~event~~that ~~any loans are made to~~ the ~~Trust,~~ ~~the~~settlement ~~Trust Agreement~~agreement ~~will prohibit the Trustee from~~did ~~making~~not ~~any~~require ~~distributions~~him to ~~unitholders~~dismiss ~~until~~his ~~those loans are repaid in full~~lawsuit.

~~For~~Although the ~~first~~Trustee ~~nine~~believes ~~months~~that ~~of 2010,~~ the ~~Trust~~settlement ~~did not receive any~~agreement ~~royalty~~clearly ~~revenue~~required ~~associated~~the ~~with~~dismissal of the ~~Jay~~Beckett ~~Field~~lawsuit, ~~Offshore~~the ~~Louisiana~~Trustee orhas ~~South~~called ~~Pass~~a 89second ~~properties.~~meeting ~~The Trust received $50~~ of ~~royalty~~ ~~revenue from~~ the ~~Fee~~Unitholders ~~Land property~~ for the ~~first nine~~ ~~months~~purpose of ~~2010.~~voting ~~Excess~~on ~~production~~a ~~costs~~proposal ~~must be recovered~~ by ~~the Working~~Mr. Beckett ~~Interest~~to ~~Owners before any distribution of royalty~~appoint ~~revenues~~James ~~will~~E. beBarlett ~~made~~as tosuccessor ~~the Trust~~trustee. ~~For~~In ~~the~~connection ~~first~~with ~~nine months of 2009,~~ the ~~Trust did not receive any royalty revenue associated~~ ~~with~~calling ~~Jay Field and Offshore Louisiana properties. The Trust received $737,199~~ of ~~royalty revenue from~~ the ~~South~~second ~~Pass 89 property and $57~~meeting,~~818~~ ofMr. Beckett ~~royalty~~dismissed ~~income from the Fee Land~~his ~~property~~lawsuit with prejudice.

The ~~Working~~Trust Agreement ~~Interest~~provides ~~Owners~~that ~~received~~if ~~insurance~~any ~~recovery~~asset ~~proceeds of~~required ~~$32,746 and $1,448,205 for South Pass 89 and Offshore~~to ~~Louisiana~~be ~~during~~sold ~~the~~has ~~first~~not ~~nine~~been ~~months~~sold ofby December 31, 2010, ~~respectively.~~the Trustee ~~For~~is to cause the ~~first~~asset ~~nine~~to ~~months~~be ofsold ~~2009,~~at ~~the~~public ~~Working~~auction ~~Interest~~to ~~Owner~~the ~~received~~highest ~~insurance~~cash ~~recovery~~bidder. ~~proceeds of $927~~Consequently,~~814~~ ~~for~~unless ~~South~~replaced ~~Pass~~or otherwise ~~89,~~prevented afrom ~~portion~~doing ofso, ~~which~~the ~~was~~Trustee ~~applied~~intends to ~~accumulated~~auction ~~excess~~the ~~production~~remaining ~~costs~~Trust ~~and~~assets ~~current~~in ~~production~~accordance ~~costs.~~with ~~The remaining~~the ~~insurance~~Trust Agreement. ~~proceeds~~The ~~combined~~Trustee ~~with~~will ~~royalty~~mail ~~revenues~~notice ~~resulted~~of inany public ~~net~~auction ~~royalty~~to ~~income~~all ofUnit ~~$526,457~~holders toat ~~the~~least ~~Trust~~30 days ~~for~~prior ~~South~~to ~~Pass 89~~any ~~for~~such ~~the~~auction ~~first~~in ~~nine~~accordance ~~months~~with ofthe ~~2009~~Trust Agreement. InNo approval ~~addition,~~of the ~~Working Interest~~Unit ~~Owner~~holders ~~received~~will ~~insurance~~be ~~proceeds~~required ofin ~~$9,113,272~~connection ~~for~~with ~~Offshore~~the ~~Louisiana~~sale ~~which was applied to reduce a portion~~ of the Trust’s ~~accumulated excess production costs for this property~~assets.

As of March 31, 2011, the Trust had $557,307 in cash (all ~~Recent~~of which had been advanced to the Trust by BNY Mellon, as ~~Developments~~described below) and was holding unpaid invoices for administrative expenses totaling approximately $1,449,859 In addition, BNY Mellon, an affiliate of the Trustee, has made interest-free advances to enable the Trust to pay administrative expenses. As of March 31, 2011, the total amount advanced to the Trust (the “Bank Advance”) by BNY Mellon was $1,144,310 Based on current general and administrative expenditures, in the absence of Royalty Revenues the Trustee expects that the Trust will be required to borrow money in accordance with the Trust Agreement to fund future Trust expenses. However, no assurance can be given that the Trust will be able to borrow money on terms the Trustee considers reasonable or at all. The Trust Agreement permits, but does not require, The Bank of New York Mellon Trust Company, N.A. or an affiliate to lend funds to the Trust. The Trust Agreement prohibits the Trust from making any distributions to unitholders until all loans are repaid in full.

AAs ~~meeting~~ of ~~the~~October 20, ~~unit~~2011, ~~holders~~the ~~has~~Trust ~~been~~had ~~called~~no bycash ~~the~~except ~~Trustee at~~for the ~~request~~cash ofadvanced ato ~~unit~~the ~~holder.~~Trust ~~The~~by ~~purpose~~BNY ofMellon, ~~the~~as ~~meeting~~affiliate ~~is to~~of ~~vote~~the onTrustee, ~~the~~as ~~unit~~an ~~holder’s~~interest-free ~~proposal~~advance to ~~remove~~enable ~~The~~the ~~Bank~~Trust ofto ~~New~~pay ~~York~~administrative ~~Mellon~~expenses. ~~Trust~~As of October ~~Company~~20, ~~N.A.~~2011, asthe total ~~Trustee~~amount ~~and~~advanced to ~~appoint~~ athe ~~successor~~Trust ~~trustee~~(the of“Bank Advance”) by the ~~Trust.~~Bank ~~The~~was ~~meeting~~$2,379,347, ~~was~~of which $9,968 ~~convened~~remained onavailable ~~August 12,~~to ~~2011.~~pay ~~Because~~expenses ~~the~~at ~~proposed~~October 20, ~~successor~~2011. ~~trustee~~However, ~~withdrew~~at ~~its~~October 20, ~~consent~~2011, toin ~~serve~~addition ~~shortly prior~~ to the amount ~~meeting~~owed to the Bank, the ~~meeting~~Trust ~~has~~was ~~been~~also ~~adjourned~~holding ~~until~~unpaid ~~August 24,~~invoices for ~~2011.~~administrative ~~All~~services ~~statements~~totaling in$509,362. ~~this~~See ~~report~~Management’s Discussion ~~regarding~~and ~~the~~Analysis. ~~intentions~~The ~~or future~~entire ~~actions~~amount of the ~~Trustee~~Bank ~~depend~~Advance and onall ~~the~~other ~~Trustee~~liabilities ~~remaining the~~and ~~trustee~~expenses of the Trust. ~~However,~~must ~~the~~be repaid ~~Trustee~~before ~~may~~any distribution can be ~~replaced at~~made ~~the~~to ~~meeting~~Unit holders.

~~The~~For ~~Trust Agreement provides that~~ the ~~Trust~~first ~~will~~quarter ~~terminate in~~of ~~the~~2011, ~~event that~~ the ~~net~~Trust ~~revenues~~did ~~fall~~not ~~below~~receive ~~$5,000,000 for two~~any ~~successive~~royalty ~~years~~revenue. ~~(“the~~Excess ~~Termination~~production ~~Threshold”).~~costs ~~Net revenues~~must tobe recovered by the ~~Trust~~Working ~~for~~Interest ~~the~~Owners ~~years~~before ~~ended~~any ~~December 31,~~distribution ~~2007~~of royalty ~~and~~revenues ~~2006~~will ~~calculated~~be inmade ~~accordance~~to ~~with~~ the Trust ~~Agreement were~~. ~~$1,634,740~~For ~~and~~the ~~$2,094,226,~~first ~~respectively.~~quarter ~~Consequently~~of 2010, the Trust isdid ~~required~~not toreceive ~~terminate~~any ~~and~~royalty isrevenue ~~now~~except ~~required to sell the~~for ~~assets~~$9,199 of royalty revenue from the ~~Trust~~Fee ~~for~~Lands property.

-87-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

cash in a public auction. After paying or making provision for all actual and contingent liabilities of the Trust, including fees of the Trustee, the Trustee will distribute any remaining cash as promptly as practicable. Despite the termination of the Trust, the Trustee is continuing to act as Trustee for purposes of liquidating and winding up the affairs of the Trust. The Trustee does not expect to make any further monthly distributions to Unit holders in the interim period prior to any distribution resulting from the sale of the Trust’s assets.

The Trustee has retained the Financial Advisor to market the Trust’s assets. However, as announced by the Trustee on October 22, 2008, the Trustee previously determined that, in light of market conditions at that time, it was in the best interests of the Trust Unit holders to postpone the sale of the Trust’s assets for an indefinite period of time. The Trustee recommenced the marketing efforts in 2010. The Financial Advisor marketed the Trust’s assets and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the assets in accordance with the terms of the Trust Agreement. However, as previously announced, in November 2010 the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan. Mr. Beckett’s Complaint seeks a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also makes a number of other allegations and seeks removal of the Trustee and other relief.

As a result of Mr. Beckett’s lawsuit, certain bidders who had submitted preliminary indications of interest to the Financial Advisor indicated that they were unwilling to proceed with the purchase of the Jay Field interest from the Trust until the Beckett lawsuit was resolved. Consequently, as previously disclosed, the Trustee suspended the sale process pending resolution of the lawsuit. On March 4, 2011 the Court entered a stipulated order in which the Trust voluntarily agreed that the Trust would not sell any assets of the Trust until at least such time as the Court entered an order dismissing or transferring the case or preliminarily enjoining the sale of the assets. The Trustee has filed a Motion to Dismiss for Failure to Join Required Parties, or, in the Alternative, to Transfer Venue with the Court seeking dismissal of the suit and/or transfer of the suit to the United States District Court for the Western District of Texas. However, on July 7, 2011, Mr. Beckett and the Trust entered into a settlement agreement pursuant to which Mr. Beckett agreed to dismiss his lawsuit with prejudice within ten days after the Trust holds a meeting of the Unit holders for the purpose of voting on a proposal to remove the Trustee and to appoint a successor trustee of the Trust, provided that notice of the meeting is mailed by August 1, 2011 and the meeting occurs by September 1, 2011. Notice of the meeting was mailed prior to August 1, 2011, and the meeting was convened on August 12, 2011. Because the proposed successor trustee withdrew its consent to serve shortly prior to the meeting, the meeting has been adjourned until August 24, 2011. If the suit is not dismissed, the pending suit could adversely affect the price the Trust might receive in any sale that may be possible.

As a result of the Beckett lawsuit, the Trust was unable to complete the sale of its assets prior to December 31, 2010, and is now required by the terms of the Trust Agreement to sell the assets by means of a public auction. The Trustee is unable to predict whether the persons who had submitted preliminary indications of interest in acquiring the Trust’s assets in 2010 will be interested in bidding for them in a public auction, or, if they are willing to bid,

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

whether they will bid more or less than the amounts they indicated they would consider on a preliminary basis. The preliminary indications of interest the Financial Advisor received when it marketed the Jay Field interest in 2010 ranged from $500,000 to $3,500,000. None of the preliminary indications of interest were firm offers, and all of them remained subject to further review.

The Trust Agreement provides that if any asset required to be sold has not been sold by December 31, 2010, the Trustee is to cause the asset to be sold at public auction to the highest cash bidder. Consequently, unless removed or prevented from doing so by a court order, the Trustee will auction the Trust’s assets. In connection with the auction, the Trustee will mail notice of a public auction to all Unit holders at least 30 days prior to any such auction. No approval of the Unit holders will be required in connection with the sale of the Trust’s assets.

As of September 30, 2010, the Trust had $3,223 in cash reserved for expenses and was holding unpaid invoices for administrative services totaling $566,311.

As of December 31, 2009, the Trust had $3,741 in cash and was holding unpaid invoices for administrative services totaling $393,577. See “Management’s Discussion and Analysis”.

As of August 19, 2011, the Trust had no cash except for the cash advanced to the Trust by BNY Mellon, as affiliate of the Trustee, as an interest-free advance to enable the Trust to pay administrative expenses. As of August 19, 2011, the total amount advanced to the Trust (the “Bank Advance”) by the Bank was $2,255,520, of which $161,217 remained available to pay expenses. However, at August 19, 2011, in addition to the amount owed to the Bank, the Trust was also holding unpaid invoices for administrative services totaling $443,492. See Management’s Discussion and Analysis. The entire amount of the Bank Advance and all other liabilities and expenses of the Trust must be repaid before any distributions can be made to Unit holders.

If the Trust is unable to sell its assets and liquidate promptly, the Trust may attempt to borrow additional funds in accordance with the Trust Agreement to fund Trust expenses. However, the Trust will be prohibited from borrowing additional funds unless the Trustee determines that the total amount the Trust would then have borrowed is less than 50% of the amount of revenues the Trustee estimates will be received by the Trust during the immediately following six months. Consequently, unless the Trustee determines that the Trust’s assets will be sold within six months, no further borrowings appear reasonably possible. Even if the Trust is able to proceed with the sale of its assets, the Trust may not be able to borrow funds. The Trust Agreement permits, but does not require, The Bank of New York Mellon Trust Company, N.A. or an affiliate to lend funds to the Trustee. In the event any loans are made to the Trust, the Trust Agreement will prohibit the Trustee from making any distributions to Unit holders until those loans are repaid in full. If the Trust is unable to sell its assets or borrow additional funds, the Trust would probably have to be liquidated in bankruptcy.

For the first nine months of 2010, the Trust did not receive any royalty revenue associated with the Jay Field, Offshore Louisiana or South Pass 89 properties. The Trust received $50 of royalty revenue from the Fee Land property for the first nine months of 2010. Excess production costs must be recovered by the Working Interest Owners before any distribution of royalty revenues will be made to the Trust. For the first nine months of 2009, the

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

Trust did not receive any royalty revenue associated with Jay Field and Offshore Louisiana properties. The Trust received $737,199 of royalty revenue from the South Pass 89 property and $57,818 of royalty income from the Fee Land property.

During the entire year for 2010 the Trust did not receive any royalty revenue except for $10,064 from the Fee Lands (which were sold in November 2009) and for $223,910 received in 2010 as an adjustment resulting from a review conducted by an independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of the net proceeds properly payable to the Trust with respect to the Jay Field Property. The adjustment related to the Working Interest Owner’s calculation of the net proceeds from the acquisition of the Jay Field working interest by Quantum Resources Management, LLC in 2007 through August 2008. The portion of the adjustment related to 2007, even if received in 2007, would not have affected the termination of the Trust in accordance with the terms of the Trust Agreement.

During 2009, the only royalty revenue the Trust received was $737,199 with respect to the South Pass 89 property and $70,905 from the Fee Lands. In addition, on November 11, 2009, the Trust sold its interest in the south Louisiana acreage described in the Trust’s public filings as the “Fee Lands”. The sale resulted in cash proceeds to the Trust, net of fees of $24,828 paid to the auction company that conducted the sale, of approximately $500,000.

During 2008, the Trust received a single payment of approximately $437,000 as a result of a review conducted by an independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of amounts relevant to the determination of the net proceeds properly payable to the Trust with respect to the inadvertent inclusion of sulfur extraction processing costs at the Jay and Little Escambia Creek Field Unit desulfurization plant in the calculation of Jay Field Gross Proceeds. The only other royalty revenue the Trust received in 2008 was $204,741 attributable to the Fee Lands Royalties and $37,239 attributable to South Pass 89.

As previously described in the Trust’s filings, in addition to the Working Interest Owners’ rights to recover Excess Production Costs prior to making payments to the Trust, the Working Interest Owners have the right under the Conveyances to escrow or withhold amounts for certain anticipated future expenses, and the Working Interest Owners have done so and expect to continue doing so in the future. The Working Interest Owners are not required to fund actual escrow accounts, and neither has done so. However, they must calculate the royalties as though they have done so.

Unit holders should review the reserve reports as of September 30, 2009 and 2010 filed as exhibits to this Form 10-Q but should note, as previously disclosed in the Trust’s filings, that the reserve reports are not necessarily indicative of the market value of the interests, and the value of the Trust’s assets will be determined solely by the amount a buyer is willing to pay for the assets.

As previously disclosed, the administrative expenses of the Trust are approximately $1,000,000 annually, but have increased as a result of the Beckett lawsuit. As described above, the Trust’s unpaid invoices at August 19, 2011 were approximately $443,492, and the Trust owed an additional $2,255,520 to the Bank, of which $161,217 remained available to pay expenses. All additional expenses, including expenses incurred by the Trust but for which

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

no invoices had been received at August 19, 2011, and including fees that will become payable to the Financial Advisor upon the sale of the assets and all other fees the Trust incurs, whether in connection with the Beckett lawsuit or as a result of the delays caused by the Beckett lawsuit, must be paid prior to any distribution to Unit holders. It is increasingly likely that the sale of the Trust’s assets will not generate sufficient proceeds to pay the Trust’s liabilities. If the sale of the Trust’s assets does not generate sufficient proceeds to pay the Trust’s liabilities, there will be no further distributions to Trust Unit holders. As noted above, however, all Trust Unit holders will be mailed a notice of the public auction of the Trust’s assets, and any Unit holder who desires to do so may submit a bid for some or all of the assets.

As described in the Trust’s prior filings, the Trustee engaged an independent joint interest auditing firm (the “Consultant”), to review the computation of the amounts payable to the Trust with respect to its interest in the Jay Field from the time of the sale by The Louisiana Land and Exploration Company (“LL&E”) of its working interest to Quantum Resources Management LLC in 2007 through August 2008 (the “First Review Period”). Also as previously reported, the Consultant completed its review of the First Review Period, Quantum and the Trustee reached agreement on the issues the Consultant had raised relating to the computation of expenses properly chargeable in the calculation of amounts payable to the Trust for the First Review Period, and Quantum paid the Trust an additional $223,910 in 2010 as an adjustment relating to the First Review Period.

As further described in the Trust’s prior filings, the Trustee subsequently engaged the Consultant to review the computation of the amounts payable to the Trust with respect to its interest in the Jay Field for the production months September 2008 through March 2010 (the “Second Review Period”). Quantum and the Trustee have reached agreement on the material issues raised by the Consultant with respect to the Second Review Period.

As previously disclosed, and as permitted by the conveyances creating the Trust’s interest in the Jay Field net profits interest, Quantum has informed the Trust’s independent petroleum engineers that Quantum has determined to escrow (or otherwise deduct from any payments otherwise due to the Trust) 125% of the estimated abandonment and related costs it expects to incur in connection with the working interest from which the Trust’s interest was created. At September 30, 2010 Quantum’s estimate of the abandonment and related costs it expects to incur in connection with the working interest was approximately $15.8 million, of which approximately $4.5 million had previously been withheld by the working interest owner for estimated abandonment and related costs (the Trust’s interests in each of these figures is 50%). At December 31, 2010 Quantum’s estimate of the abandonment and related costs it expects to incur in connection with the working interest was approximately $16.1 million, of which approximately $4.5 million had previously been withheld by the working interest owner for estimated abandonment and related costs (the Trust’s interests in each of these figures is 50%). As previously disclosed, Quantum has recently indicated that it intends to withhold 125% of the estimated abandonment and related costs it expects to incur in connection with the working interest before making additional distributions to the Trust’s interest. Subject to the payment of the Excess Production Costs, the holder of the Trust’s interest would be entitled to 50% of the escrowed (or unpaid) amount remaining in excess of actual abandonment and related costs (whether the actual costs are more or less than the estimates). As previously disclosed, the conveyances do not require Quantum to place the

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

“escrowed” funds into an actual escrow account or to segregate funds in any other manner, and neither Quantum nor the prior working interest owner has done so. However, under the conveyances, Quantum (or any successor owner of the working interest) is required to calculate Gross Proceeds as though such funds had been escrowed and then subsequently utilized for purposes of paying actual abandonment and related costs. Quantum began withholding additional funds under these provisions in the Trust’s accounting month of December 2010. Information furnished by Quantum to the Trust for production month April 2011 and Trust accounting month July 2011 indicates that 125% of Quantum’s current estimate of these costs is approximately $26,500,000 and that the amount withheld in escrow is $8,900,000.

As previously disclosed, the Working Interest Owner of the Trust’s interests in South Pass 89 and Offshore Louisiana also has been escrowing funds (or otherwise deducting from any payments otherwise due to the Trust) funds for the estimated abandonment and related costs it expects to incur in connection with the working interest from which the Trust’s interest was created relating to those properties.

During 2005, Hurricanes Katrina and Rita affected the operational status of properties included in the Offshore Louisiana and South Pass 89 groups of properties, and Hurricane Dennis and Tropical Storm Cindy affected the operational status of the gas plant at Jay Field. The gas plant at Jay Field returned to full operating status on April 13, 2006. However, distributions to the Trust will be reduced significantly for a period of time as a result of the damage from these storms to the production facilities for properties in which the Trust has an interest. As a result of the uncertainty of future proceeds from these properties, the Trustee as of September 30, 2010 has reserved $3,223 that otherwise would have been distributed to the unitholders for the payment of the Trust’s likely expenses in the foreseeable future. The Trustee intends to hold these funds for use in the payment of future Trust expenses until it becomes reasonably clear that they are no longer necessary.

Following is a description of the damage caused by Hurricanes Katrina and Rita to production facilities for properties in which the Trust has an interest. This information is based on assessments of damage the Working Interest Owner has received regarding damage from Hurricanes Katrina and Rita to the Offshore Louisiana and South Pass 89 properties. All of the information in this Report on Form 10-Q relating to the operational status of the properties was provided to the Working Interest Owner by the various operators of the properties in which the Trust has an interest, and was provided to the Trust by the Working Interest Owner. The Working Interest Owner is not the operator of any of these properties, and relies on the various operators for information regarding the operational status of the various properties. Consequently, all of the information provided herein is based on preliminary and sometimes informal information provided by the operators of the Properties. The information provided herein is based on the respective operators’ preliminary assessments of the damage to the production facilities. The Trustee has been informed that the assessments are ongoing, and that the assessments of damages, the predictions of the likelihood of repairs and time necessary to complete such repairs, the decisions to repair or abandon facilities, and all other estimates and predictions, are subject to change.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

South Pass 89

Repairs due to Hurricane Katrina damage (August 2005) were completed in the fourth quarter of 2006 and the field was substantially restored to production in December 2006. The operator, Marathon Oil Company, had provided a cost estimate of $6,000,000 ($1,500,000 net to the Trust) to repair the South Pass 89 “B” platform, however the operator has indicated the actual cost to date is estimated at $6,500,000 ($1,600,000 net to the Trust).

Offshore Louisiana Properties:

East Cameron 336

The Working Interest Owner had previously elected not to participate in proposed well work and remained responsible only for field abandonment costs. The lease expired in 2007 and the operator, Apache, informed the Working Interest Owner that it had abandoned the wells in the first half of 2008. The platform has not been abandoned yet due to a 3rd party production pipeline located on the platform that requires abandonment prior to removal. It is estimated that the platform removal and abandonment will cost an additional $4,000,000 ($800,000 net to the Trust).

East Cameron 195

The East Cameron 195 platform was heavily damaged during Hurricane Rita; however, it was not a significant producer, had been shut in by the operator, Maritech, and had been approved for abandonment prior to Hurricane Rita. The operator’s early estimate of the wells-only abandonment for East Cameron 195 was $27,000,000 ($9,100,000 net to the Trust), however costs to date are estimated at $55,400,000 ($18,400,000 net to the Trust). These costs are for well abandonment only and do not include platform abandonment and debris removal costs. Well abandonment work began in February 2006 and was substantially finished in December 2006 (7 wells were plugged and abandoned and 3 wells have remaining plugging work that will be completed as part of the platform and debris removal process). Significant difficulty was observed during the abandonment of these final three wells in 2009 and 2010 as a result of the damage from Hurricane Rita and completing final plug and abandon well work and platform abandonment proved costly. To complete final site clearance and debris removal an additional $2,100,000 ($709,000 net to the trust) is estimated to be required.

South Marsh Island 76

The South Marsh Island 76 platform was heavily damaged during Hurricane Rita in 2005. The operator, Mariner, abandoned the wells in 2008 for a cost of $13,343,824 ($3,335,956 net to the Trust). It is estimated an additional $4,500,000 ($1,100,000 net to the trust) will be required for final platform abandonment, debris removal and site clearance. Reefing the platform in place is being evaluated.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

Eugene Island 261

The Eugene Island 261 platform was damaged during Hurricane Rita but was repaired and returned to production in November 2005. The estimated repair cost was $220,000 (resulting in costs attributable to the Trust’s interest of $44,000).

Vermillion 331

The Vermillion 331 platform was damaged during Hurricane Rita. The operator, Energy Resources Technology, repaired the platform and returned it to production in November 2006. The estimated repair cost was $1,200,000 (resulting in costs attributable to the Trust’s interest of approximately $150,000).

Jay Field:

In December 2006, the Working Interest Owner and ExxonMobil, as the operator of the Jay Field, sold their respective interests in the field to Quantum Resource Management LLC (Quantum). Quantum became the operator in April 2007. As described above under “Recent Developments”, Quantum suspended production from the Jay Field on December 22, 2008. Production resumed in December 2009.

Other

The Working Interest Owner has advised the Trustee that the Working Interest Owner has completed its analysis of the scope and applicability of the insurance policies carried by the Working Interest Owner to the damages that resulted from Hurricanes Katrina and Rita to properties in which the Trust has an interest. The Working Interest Owner has advised the Trustee that the Working Interest Owner believes it has received all of the insurance reimbursements it will receive for damages to the South Pass 89 and Offshore Louisiana properties, and has applied the amounts to the respective properties in which the Trust has an interest, to the extent permitted by the Trust’s governing documents, to offset existing Excess Production Costs and to fund the Special Cost Escrows for Offshore Louisiana and South Pass 89.

For the first nine months of 2009, the working interest owner received insurance recovery proceeds of $927,814 for South Pass 89, a portion of which was applied to accumulated excess production costs and current production costs. The remaining insurance proceeds combined with royalty revenues resulted in net royalty income of $737,199 to the Trust for South Pass 89 for the first nine months of 2009. In addition, the Working Interest Owner received insurance proceeds of $9,113,272 for Offshore Louisiana which was applied to reduce a portion of the Trust’s accumulated excess production costs for this property. The Trust received no insurance proceeds for Offshore Louisiana, Jay Field, or South Pass 89 during the first nine months of 2010.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

which the Trust has an interest and that the operators have determined to abandon. In particular, the work and expenses to plug, abandon and dismantle the facilities at South Marsh Island 76 and East Cameron 195 are expected to extend into 2009 or longer. The Working Interest Owner has informed the Trustee that these ongoing expenses are not insured.

The abandonment and repair costs estimated by the Working Interest Owner have had and are expected to have a material adverse effect on royalties payable from the South Pass 89 and Offshore Louisiana properties to the Trust, and from the Trust to Unit holders. As previously disclosed, the Working Interest Owner began escrowing funds otherwise distributable to the Trust from the South Pass 89 property and Offshore Louisiana properties, beginning with the April 2006 monthly distribution. Consequently, distributions from the Trust to the Unit holders have been eliminated for a period of time. The Trustee does not expect to make any further distribution prior to a final liquidating distribution after the sale of the Trust’s interests. As described herein, the Working Interest Owners are not required to fund actual escrow accounts, and neither has done so.


(2)	Basis of Presentation

The financial statements were prepared on the basis of cash receipts and disbursements and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America that may require a liquidation basis of accounting. The cash basis of reporting revenues and expenses is considered to be the most meaningful because monthly distributions to the unit holders are based on net cash receipts.

The financial statements of the Trust do not include any adjustments as a result of the termination of the Trust as described in notes 1 and 3 and are prepared on the following basis:

(a) Royalties are recorded on a cash basis and are generally received by the Trustee in the third month following the month of production of oil and gas attributable to the Trust’s interest.

(b) Trust expenses, which include accounting, engineering, legal and other professional fees, Trustee’s fees and out-of-pocket expenses, are recorded on a cash basis.

(c) The carrying value of the Trust’s royalty interests as of ~~September~~March 3031, ~~2010,~~2011 is not necessarily indicative of the fair market value of the interests held by the Trust.

This basis for reporting distributable income is considered to be the most meaningful because distributions to the unitholders for a month are based on net cash receipts for such month. However, it will differ from the basis used for financial statements prepared in accordance with accounting principles generally accepted in the United States of America because, under such accounting principles, royalty income for a month would be based on net proceeds from sales for such month without regard to when calculated or received, and ~~accounting~~interest ~~principles~~income for a month would be calculated only through the end of such month, and accounting principles generally accepted in the United States would require a liquidation basis of accounting.

The preparation of the financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The financial information furnished herein should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-~~16-~~K for the year ended December 31, 2010. The information furnished reflects all adjustments which are, in the opinion of the Trustee, necessary for a fair presentation of the results for the interim periods presented.

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The financial information furnished herein should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the years ended December 31, 2009 and 2010. The information furnished reflects all adjustments which are, in the opinion of the Trustee, necessary for a fair presentation of the results for the interim periods presented.


(3)	Going Concern

The accompanying financial statements have been prepared under the assumption the Trust will continue as a going concern.. As discussed in ~~note~~Note 1, the Trust’s net revenues did not exceed the $5,000,000 Termination Threshold stipulated by the Trust Agreement for the second consecutive year, thus requiring the Trust to terminate ~~effective December 31,~~ ~~2007. The accompanying financial statements do not include any adjustments as a result of the termination of the Trust.~~

~~The Trust has $3,223 in cash reserved for Trust expenses as of~~ September 30, 2010. Based on current general and administrative expenditures, in the absence of Royalty Revenues the Trustee expects that it will be required to borrow money in accordance with the Trust Agreement to fund future Trust expenses. However, no assurance can be given that the Trustee will be able to borrow money on terms the Trustee considers reasonable or at all. The Trust Agreement permits, but does not require, The Bank of New York Mellon Trust Company, N.A. or an affiliate to lend funds to the Trustee. In the event any loans are made to the Trust, the Trust Agreement will prohibit the Trustee from making any distributions to unit holders until those loans are repaid in full. See the Trust’s Annual Report on Form 10-K8- ~~for the year ended December 31, 2010.~~

(4) Net Overriding Royalty Interests and Fee lands Royalties

The instruments conveying the Overriding Royalties generally provide that the Working Interest Owners or any successor Working Interest Owners will calculate and pay to the Trust each month an amount equal to various percentages of the Net Proceeds (as defined) from the Productive Properties. For purposes of computing Net Proceeds, the Productive Properties have been grouped geographically into three groups of leases, each of which has been defined as a separate “Property.” Generally, Net Proceeds are computed on a Property-by-Property basis and consist of the aggregate proceeds to the Working Interest Owners or any successor working interest owner from the sale of oil, gas and other hydrocarbons from each of the Productive Properties less: (a) all direct costs, charges, and expenses incurred by the Working Interest Owners in exploration, production, development and other operations on the Productive Properties (including secondary and tertiary recovery operations), including abandonment costs; (b) all applicable taxes, including severance and ad valorem taxes, but excluding income taxes except as described in note 5 below; (c) all operating charges directly associated with the Productive Properties; (d) an allowance for costs if costs and expenses for any Productive Property have exceeded proceeds of production from such Productive Property in a preceding month; and (e) charges for certain overhead expenses.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

Aseffective ~~noted previously~~December 31, on2007. ~~November 11~~Accordingly, ~~2009,~~there ~~the Trust sold~~exists ~~its~~substantial ~~interest~~doubt inabout the ~~south Louisiana acreage described in the~~ Trust’s ~~public~~ability ~~filings~~to continue as a ~~the~~going ~~“Fee Lands”~~concern. The ~~sale~~ ~~resulted~~accompanying infinancial ~~cash~~statements ~~proceeds~~do ~~to the Trust, net of fees of~~not ~~$24,828~~include ~~paid~~any toadjustments ~~the~~as ~~auction~~a ~~company~~result ~~that~~of ~~conducted~~ the ~~sale,~~termination of the ~~approximately $500,000~~Trust.

~~The~~As ~~Trustee~~of ~~engaged~~March 31, an2011, ~~independent~~the ~~joint~~Trust ~~venture~~had ~~auditor~~$557,307 toin cash (all ~~review~~of ~~payments~~which had been advanced to the Trust ~~for~~by aBNY ~~portion~~Mellon, as described below) and was holding unpaid invoices totaling approximately $1,449,859. In addition, BNY Mellon, an affiliate of the ~~Trust~~Trustee, has made interest-free advances to enable the ~~properties~~Trust asto ~~part~~pay administrative expenses. As of March 31, 2011, the ~~termination~~total ofamount advanced to the Trust (the “Bank Advance”) by BNY Mellon was $1,144,310. ~~The~~Based ~~joint~~on current ~~venture~~general ~~auditor~~and ~~reviewed~~administrative expenditures, in the ~~period~~absence ~~from~~of Royalty ~~January~~Revenues ~~2004~~the ~~through~~Trustee expects that the Trust will be ~~December~~required ~~2007.~~to Asborrow amoney ~~result~~in ofaccordance with the Trust Agreement ~~review~~to fund future Trust expenses. However, ~~one~~no assurance ofcan be given that the ~~Working~~Trust will be able to borrow ~~Interest~~money ~~Owners~~on ~~made~~terms athe ~~payment~~Trustee ofconsiders ~~approximately~~reasonable ~~$437~~or at all. The Trust Agreement permits,~~000~~ inbut does not require, The Bank of ~~March~~New ~~2008~~York Mellon Trust Company, N.A. or an affiliate to lend funds to the Trust. The Trust Agreement prohibits the Trust from making any distributions to ~~settle~~unitholders ~~certain~~until ~~issues~~all ~~identified~~loans are repaid in full.


(4)	Net Overriding Royalty Interests

The instruments conveying the Overriding Royalties generally provide that the Working Interest Owners or any successor Working Interest Owners will calculate and pay to the Trust each month an amount equal to various percentages of the Net Proceeds (as defined) from the Productive Properties. For purposes of computing Net Proceeds, the Productive Properties have been grouped geographically into three groups of leases, each of which has been defined as a separate “Property.” Generally, Net Proceeds are computed on a Property-by-Property basis and consist of the aggregate proceeds to the Working Interest Owners or any successor working interest owners from the sale of oil, gas and other hydrocarbons (but not sulfur) from each of the Productive Properties less: (a) all direct costs, charges, and expenses incurred by the Working Interest Owners in exploration, production, development and other operations on the Productive Properties (including secondary and tertiary recovery operations), including abandonment costs; (b) all applicable taxes, including severance and ad valorem taxes, but excluding income taxes except as described in note 5 below; (c) all operating charges directly associated with the Productive Properties; (d) an allowance for costs if costs and expenses for any Productive Property have exceeded proceeds of production from such Productive Property in a preceding month; and (e) charges for certain overhead expenses.


(5)	Income Tax Matters

In May and June 1983, the Company applied to the Internal Revenue Service (IRS) for certain rulings, including the following: (a) the Trust would be classified for federal income tax purposes as a trust and not as an association taxable as a corporation, (b) the Trust would be characterized as a “grantor” trust as to the Unit holders and not as a “simple” or “complex” trust (a “non-grantor” trust), (c) the Partnership would be classified as a partnership and not as an association taxable as a corporation, (d) the Company would not recognize gain or loss upon the transfer of the Royalties to the Trust or upon the distribution of the Units to its stockholders, (e) each Royalty would be considered an economic interest in oil and gas in place, and each Overriding Royalty would constitute a single property within the meaning of Section 614(a) of the Internal Revenue Code, (f) the steps taken to create the Trust and the Partnership and to distribute the Units would be viewed for federal income tax purposes as a distribution of the Royalties by the Company to its stockholders, followed by the contribution of the Royalties by the stockholders to the Partnership in exchange for interests therein, which in turn was followed by the contribution by the stockholders of the interests in the Partnership to the Trust in exchange for Units, and (g) the transfer of a Unit of the Trust would be considered for federal income tax purposes to be the transfer of the proportionate part of the Partnership interest attributable to such Unit.

~~Subsequent to the distribution of the Units, the IRS ruled~~ ~~favorably on all requested rulings except (d). Because the~~-9- rulings were issued after the distribution of the Units, however, the rulings could be revoked by the IRS if it changes its position on the matters they address. If the IRS changed its position on these issues, challenged the Trust and the Unit holders and was successful, the result could be adverse.

The Company withdrew its requested ruling (d) that the Company did not recognize gain or loss upon the transfer of the Royalties to the Trust or upon distribution of the Units to its stockholders because the IRS proposed to rule that the transfer and distribution resulted in the recapture of ordinary income attributable to intangible drilling and development costs under Section 1254 of the Code (IDC Recapture Income). Counsel for the Company expressed no opinion on this issue. The Company and the IRS subsequently litigated the issue, and in 1989 the Tax Court rendered an opinion favorable to the Company. The Tax Court held that the Company’s transfer of the Royalties to the Trust and its distribution of the Units to its stockholders did not constitute a disposition of “oil, gas, or geothermal property” within the meaning of Section 1254 of the Code. Consequently the Company was not

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

~~required~~Royalty would be considered an economic interest in oil and gas in place, and each Overriding Royalty would constitute a single property within the meaning of Section 614(a) of the Internal Revenue Code, (f) the steps taken to ~~recognize~~create ~~IDC~~the Trust ~~Recapture~~and ~~Income~~the onPartnership and to distribute the ~~disposition~~Units would be viewed for federal income tax purposes as a distribution of the Royalties by the Company to its stockholders, followed by the contribution of the Royalties. ~~The~~by ~~opinion~~the stockholders to the Partnership in exchange for interests therein, which in turn was followed by the contribution by the stockholders of the interests ~~Tax~~in ~~Court~~the ~~has~~Partnership ~~become~~to ~~final~~the Trust in exchange for Units, and (g) the transfer of a Unit of the Trust would be ~~nonappealable~~considered for federal income tax purposes to be the transfer of the proportionate part of the Partnership interest attributable to such Unit.

Subsequent to the distribution of the Units, the IRS ruled favorably on all requested rulings except (d). Because the rulings were issued after the distribution of the Units, however, the rulings could be revoked by the IRS if it changes its position on the matters they address. If the IRS changed its position on these issues, challenged the Trust and the Unit holders and was successful, the result could be adverse.

The Trustee assumes that some Trust Units are held by a middleman, as such term is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint owners, and brokers holding an interest for a custodian in street name). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. The Bank of New York Mellon Trust Company, N.A., 919 Congress Avenue, Austin, Texas 78701, telephone number 1-800-852-1422, is the representative of the Trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT.

These financial statements are prepared on the basis that the Trust will be treated as a “grantor” trust and that the Partnership will be treated as a partnership for federal income tax purposes. Accordingly, no income taxes are provided in the financial statements. In addition, there is no state income tax liability for the period.

~~(6) Dismantlement Costs~~ -10-

According to the reserve report as of September 30, 2009, dated May 24, 2011, filed as an exhibit to this Form 10-Q, the total future dismantlement costs to the Working Interest Owners are estimated to be $15,800,00 for the Jay Field property, $12,700,000 for the South Pass 89 property, and $22,900,000 for the Offshore Louisiana property. The Trust’s interests in these properties are equivalent to 50% of the net proceeds from Jay Field and South Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana property.

According to the reserve report as of September 30, 2010, dated June 8, 2011, filed as an exhibit to this Form 10-Q, the total future dismantlement costs to the Working Interest Owners are estimated to be $16,100,000 for the Jay Field property, $11,300,000 for the South Pass 89 property, and $10,600,000 for the Offshore Louisiana property. The Trust’s interests in these properties are equivalent to 50% of the net proceeds from Jay Field and South Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana property.

The Working Interest Owners, under the terms of the Trust Conveyances, are permitted to escrow funds from the Productive Properties for estimated future costs such as dismantlement costs and capital expenditures. Beginning with the April 2006 distribution, the Working Interest Owner elected to escrow funds from the South Pass 89 and Offshore properties due to significant increases in estimated dismantlement costs for the Offshore Louisiana property and capital expenditures for the South Pass 89 properties due to damage caused by Hurricanes Katrina and Rita. During the first nine months of 2010, the Working Interest Owner withheld $1,849,505 and $2,831,086 in escrow from the South Pass 89 and Offshore Louisiana Properties respectively. The Working Interest Owner expended $1,594,279 and $1,153,668 from the escrow funds for dismantlement costs incurred during the first nine months of 2010 for the South Pass 89 and Offshore Louisiana properties, respectively.

The cumulative escrow balance as of September 30, 2010 was $4,543,402 for the Jay Field property and $9,192,149 for the South Pass 89 property, 50 percent of which would otherwise have been distributable to the Trust

-19-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

~~after~~(6) ~~recovery~~Dismantlement of excess production costs. The cumulative escrow balance as of September 30, 2010 for the Offshore Louisiana property was $10,535,034, 90 percent of which would otherwise have been distributable to the Trust after recovery of excess production costs. The Conveyances prohibit the Working Interest Owner from escrowing additional funds for estimated future Special Costs with respect to a particular Productive Property once the amount escrowed exceeds 125% of the aggregate estimated future Special Costs for that Property. The Conveyances permit the Working Interest Owner to release funds from any of the Special Costs escrows at any time if it determines in its sole discretion that there no longer exists a need for escrowing all or any portion of such funds. However, the Working Interest Owner is not required to do so.

According to the reserve report as of September 30, 2010, the total future dismantlement costs to the Working Interest Owners are estimated to be $16,100,000 for the Jay Field property, $11,300,000 for the South Pass 89 property, and $10,600,000 for the Offshore Louisiana property. However, according to the most recent estimates provided to the Trust by the Jay Field Working Interest Owner, the estimated dismantlement costs at Jay Field have increased to $20,367,781. The Trust’s interests in these properties are equivalent to 50% of the net proceeds from Jay Field and South Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana property.

The Working Interest Owners, under the terms of the Trust Conveyances, are permitted to escrow or otherwise deduct funds from the Productive Properties for estimated future costs such as dismantlement costs and capital expenditures. Beginning with the April 2006 distribution, the Working Interest Owner elected to escrow funds from the South Pass 89 and Offshore properties due to significant increases in estimated dismantlement costs for the Offshore Louisiana property and capital expenditures for the South Pass 89 properties due to damage caused by Hurricanes Katrina and Rita. During the first quarter of 2011 the Working Interest Owner withheld $578,760 and $611,621 in escrow from the Offshore Louisiana and South Pass 89 Properties, respectively. The Working Interest Owner expended $2,975,945 and $16,382 during the first quarter of 2011 for the Offshore Louisiana and South Pass 89 properties, respectively.

The cumulative escrow balance as of March 31, 2011 was $6,031,679 for the Jay Field property, and $10,186,513 for the South Pass 89 property, 50% of which would otherwise have been distributable to the Trust after recovery of excess production costs and payment of all abandonment, dismantlement and related costs in accordance with the conveyances. The cumulative escrow balance as of March 31, 2011 for the Offshore Louisiana property was $8,366,523, 90% of which would otherwise have been distributable to the Trust after recovery of excess production costs and payment of all abandonment, dismantlement and related costs in accordance with the conveyances. The Conveyances prohibit the Working Interest Owners from escrowing additional funds for estimated future Special Costs with respect to a particular Productive Property once the amount escrowed exceeds 125% of the aggregate estimated future Special Costs for that Property. The Conveyances permit the Working Interest Owners to release funds from any of the Special Costs escrows at any time if it determines in its sole discretion that there no longer exists a need for escrowing all or any portion of such funds. However, the Working Interest Owners are not required to do so.

The Working Interest Owners have advised the Trustee that based on current estimates, the Working Interest Owners are permitted to place additional funds in escrow from each of the properties. Commencing with the April 2006 monthly distribution, the Working Interest Owner began escrowing all amounts otherwise distributable to the Trust from the Offshore Louisiana and South Pass 89 properties. The Working Interest Owners have advised the Trustee that they anticipate escrowing all additional funds from all of the properties.

As previously disclosed, the conveyances do not require the Working Interest Owners to place the “escrowed” funds into an actual escrow account or to segregate funds in any other manner, and none of the working interest ~~owners has done so.~~ However, under the conveyances, each Working Interest Owner (or any successor owner of the working interest) is required to calculate Gross Proceeds as though such funds had been escrowed and then subsequently utilized for purposes of paying actual abandonment and related costs.

~~(7) Contingencies~~ -11-

The Working Interest Owner informed the Trustee that the Working Interest Owner has been named as one of many defendants in certain lawsuits alleging the underpayment of royalties on the production of natural gas and natural gas liquids through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs in some of the lawsuits allege that the underpayment of royalties, among other things, resulted in false forms being filed by the Working Interest Owner with the Minerals Management Service, thereby violating the civil False Claims Act.

If the plaintiffs are successful in the matters described above, revenues to the Trust could decrease. A judgment or settlement could entitle the Working Interest Owner to reimbursements for past periods attributable to properties covered by the Trust’s interest, which could decrease future royalty payments to the Trust. The Working Interest Owner has informed the Trustee that at this time, the Working Interest Owner is not able to reasonably estimate the amount of any potential loss or settlement allocable to the Trust’s interest.

(8) Subsequent Events

As previously disclosed in the Trust’s filings since the creation of the Trust in 1983, the Trust is now required by the terms of the Trust Agreement to sell its assets and to liquidate. As previously disclosed, the Trustee engaged

-20-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

~~Stifel,~~owners ~~Nicolaus &~~has ~~Company,~~done ~~Incorporated~~so. However, ~~a nationally-recognized~~under ~~investment banking firm (~~the ~~“Financial~~ ~~Advisor”)~~conveyances, toeach ~~market the Trust’s assets~~Working inInterest ~~anticipation~~Owner of(or aany ~~sale~~successor inowner ~~accordance with the terms~~ of the ~~Trust Agreement.~~ ~~The~~working ~~Financial Advisor marketed the~~interest) ~~Trust’s~~is ~~assets~~required ~~and had received preliminary indications of interest in late 2010, and the Trustee intended~~ to ~~sell~~calculate ~~the assets~~Gross inProceeds ~~accordance with the terms of the Trust Agreement. However,~~ as ~~previously~~though ~~announced,~~such infunds ~~November 2010 the Trust and~~had ~~Trustee~~been ~~were~~escrowed ~~named as defendants in a Complaint for Legal~~ and ~~Equitable~~ ~~Relief~~then ~~(the~~subsequently ~~“Complaint”)~~utilized ~~filed by Jeff Beckett in the United States District Court~~ for ~~the~~purposes ~~Eastern District~~ of ~~Michigan. Mr. Beckett’s Complaint sought a~~ ~~judicial~~paying ~~modification~~actual ofabandonment ~~the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply~~ and anrelated ~~order preventing the sale of the Trust’s assets~~costs. ~~The Complaint~~ ~~also made a number of other allegations and sought removal of the Trustee and other relief.~~

~~However, on July~~ (7,) 2011, Mr. Beckett and the Trust entered into a settlement agreement pursuant to which Mr. Beckett agreed to dismiss his lawsuit with prejudice within ten days after the Trust holds a meeting of the Unit holders for the purpose of voting on a proposal to remove the Trustee and to appoint a successor trustee of the Trust, provided that notice of the meeting is mailed by August 1, 2011 and the meeting occurs by September 1, 2011. Notice of the meeting was mailed prior to August 1, 2011, and the meeting was convened on August 12, 2011. Because the proposed successor trustee withdrew its consent to serve shortly prior to the meeting, the meeting has been adjourned until August 24, 2011. Contingencies

AsThe aWorking ~~result~~Interest ofOwner ~~Mr. Beckett’s~~informed ~~lawsuit,~~the ~~certain~~Trustee ~~bidders~~that the Working ~~who~~Interest ~~had~~Owner ~~submitted~~has ~~preliminary~~been ~~indications~~named as one of ~~interest~~many todefendants ~~the~~in ~~Financial~~certain ~~Advisor~~lawsuits ~~indicated~~alleging ~~that~~the ~~they~~underpayment ~~were~~of ~~unwilling~~royalties toon ~~proceed~~the ~~with~~production ~~the~~of ~~purchase~~natural ofgas ~~the~~and ~~Jay~~natural ~~Field~~gas ~~interest~~liquids ~~from~~through the use ~~Trust~~of ~~until~~below-market prices, improper deductions, improper ~~the~~measurement ~~Beckett~~techniques ~~lawsuit~~and ~~was~~transactions ~~resolved~~with affiliated companies. ~~Consequently,~~Plaintiffs asin ~~previously~~some of the lawsuits allege that the ~~disclosed~~underpayment of royalties, ~~the~~among ~~Trustee~~other ~~suspended~~things, resulted in false forms being filed by the ~~sale~~Working ~~process~~Interest ~~pending~~Owner with the ~~resolution~~Minerals ofManagement Service, thereby violating the ~~lawsuit~~civil False Claims Act. ~~Additional~~The ~~information~~Working ~~regarding~~Interest Owner has informed the Trustee ~~status~~that ofat this time, the ~~Beckett~~Working ~~lawsuit~~Interest ~~and~~Owner ~~the~~is ~~status~~not ofable to reasonably estimate the ~~sale~~amount of ~~the~~any potential loss or ~~Trust’s~~settlement ~~assets~~allocable isto ~~included~~the inTrust’s ~~this report~~interest.

(98) ~~Recently~~Subsequent ~~Issued Pronouncements~~events

InAs ~~December~~previously ~~2008~~disclosed in the Trust’s filings, the ~~SEC~~Trust is ~~announced~~now ~~that~~required itby ~~had~~the ~~approved~~terms of the Trust Agreement to sell ~~revisions~~its ~~designed~~assets and to ~~modernize~~liquidate. As previously disclosed, the Trustee ~~oil~~engaged ~~and~~the ~~gas~~Financial ~~company~~Advisor ~~reserve~~to market the Trust’s ~~reporting~~assets ~~requirements~~in anticipation of a sale in accordance with the terms of the Trust Agreement. The ~~most~~Financial ~~significant~~Advisor ~~amendments~~marketed the Trust’s interest in the Jay Field and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the Jay Field interest in accordance ~~requirements~~with ~~include~~the terms of the ~~following:~~Trust Agreement. However, also as previously announced, in November 2010 the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan (the “Court”). Mr. Beckett’s Complaint seeks a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also makes a number of other allegations and seeks removal of the Trustee and other relief.

• As ~~commodity~~a ~~prices~~result ~~— economic producibility~~ of ~~reserves~~Mr. Beckett’s ~~and~~lawsuit, ~~discounted~~certain ~~cash~~bidders who ~~flows~~had ~~will~~submitted bepreliminary ~~based~~indications onof ainterest ~~12-month~~to ~~average~~the Financial ~~commodity~~Advisor ~~price~~indicated ~~unless~~that ~~contractual~~they ~~arrangements~~were ~~designate~~unwilling ~~the price~~ to beproceed with ~~used;~~the •purchase ~~disclosure~~ of ~~unproved~~the ~~reserves~~Jay —Field ~~probable~~interest ~~and~~from ~~possible~~the ~~reserves~~Trust ~~may~~until the beBeckett ~~disclosed~~lawsuit ~~separately~~was onresolved. aConsequently, ~~voluntary basis; • proved undeveloped reserve guidelines — reserves may be classified~~ as ~~proved~~previously disclosed, ~~undeveloped~~the ifTrustee ~~there~~suspended isthe asale ~~high~~process ~~degree~~pending resolution of ~~confidence that~~ the ~~quantities will be recovered;~~lawsuit.

On July 7, 2011, Mr. Beckett and the Trust entered ~~-21-~~into a settlement agreement pursuant to which Mr. Beckett agreed to dismiss his lawsuit with prejudice within ten days after the Trust held a meeting of the Unitholders for the purpose of appointing Premier Bank & Trust, National Association, as successor trustee, provided that notice of the Meeting was mailed by August 1, 2011 and the Meeting occurred by September 1, 2011. The notice of the meeting to appoint Premier was mailed by August 1, 2011 and the meeting to appoint Premier occurred by September 1,

-12-

LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

• 2011. ~~reserve~~However, ~~estimation~~Premier ~~using~~refused ~~new technologies — reserves may be estimated through the use of reliable technology in addition~~ to ~~flow~~accept ~~tests~~its ~~and~~appointment, ~~production history;~~ and Mr. Beckett •has ~~nontraditional~~asserted ~~resources~~that — the ~~definition~~settlement ofagreement ~~oil~~did not ~~and~~require ~~gas~~him ~~producing~~to ~~activities~~dismiss ~~will~~his ~~expand and focus on the marketable product rather than the method of extraction~~lawsuit.

~~The~~Although ~~rules~~the ~~are~~Trustee ~~effective~~believes ~~for~~that ~~fiscal~~the ~~years~~settlement ~~ending on or after~~agreement ~~December 31,~~clearly ~~2009,~~required ~~and~~the ~~early~~dismissal ~~adoption~~of isthe ~~not~~Beckett ~~permitted.~~lawsuit, ~~The~~the ~~Trust~~Trustee has ~~adopted~~called ~~the~~a ~~new~~second ~~rules~~meeting ~~and~~of the ~~impact~~Unitholders ~~was~~for ~~immaterial~~the purpose of voting on a proposal by Mr. Beckett to appoint ~~its~~James ~~reported~~E. ~~oil~~Barlett ~~and~~as ~~gas~~successor ~~reserves~~trustee. In connection with the calling of the second meeting, Mr. Beckett dismissed his lawsuit with prejudice.

-2213-


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

The following discussion and analysis of the Trust’s financial condition and results of operations should be read in conjunction with the financial statements and notes thereto. Unless otherwise indicated, information presented or discussed herein is as of ~~September~~March 3031, ~~2010~~2011.

Note Regarding Forward-~~looking~~Looking Statements

This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Form 10-Q, including without limitation the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, are forward-looking statements. Although the Working Interest Owners have advised the Trust that they believe that the expectations reflected in the forward-looking statements contained herein are reasonable, no assurance can be given that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from expectations (“Cautionary Statements”) are disclosed in this Form 10-Q and in the Trust’s Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010, including without limitation in conjunction with the forward-looking statements included in this Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

Critical Accounting Policies

The financial statements of the Trust are prepared on the following basis:

(a) Royalties are recorded on a cash basis and are generally received by the Trustee in the third month following the month of production of oil and gas attributable to the Trust’s interest.

(b) Trust expenses, which include accounting, engineering, legal and other professional fees, Trustee’s fees and out-of-pocket expenses, are recorded on a cash basis.

(c) The carrying value of the Trust’s royalty interests at ~~September~~March 3031, ~~2010~~2011 is not necessarily indicative ~~indicative~~ of the fair market value of the interests held by the Trust.

This basis for reporting distributable income is considered to be the most meaningful because distributions to the unitholders for a month are based on net cash receipts for such month. However, it will differ from the basis used for financial statements prepared in accordance with accounting principles generally accepted in the United States of America because, under such accounting principles, royalty income for a month would be based on net proceeds from sales for such month without regard to when calculated or received and interest income for a month would be calculated only through the end of such month, and accounting principles generally accepted in the United States would require a liquidation basis of accounting.

-2314-

The unaudited data included in the financial statements and notes thereto in Item 1 are an integral part of this discussion and analysis and should be read in conjunction herewith. The information contained herein regarding operations and exploration and development activities on the properties burdened by the Royalties, and certain other matters, has been furnished by the Working Interest Owners.

Termination of the Trust

The Trust Agreement provides that the Trust will terminate in the event that the net revenues fall below $5,000,000 for two successive years (“the Termination Threshold”). Net revenues to the Trust for the years ended December 31, 2007 and 2006 calculated in accordance with the Trust Agreement were $1,634,740 and $2,094,226, respectively. Consequently, the Trust is required to terminate and is now required to sell the assets of the Trust for cash in a public auction. After paying or making provision for all actual and contingent liabilities of the Trust, including fees of the Trustee, the Trustee will distribute any remaining cash as promptly as practicable. Despite the termination of the Trust, the Trustee is continuing to act as Trustee for purposes of liquidating and winding up the affairs of the Trust. The Trustee does not expect to make any further monthly distributions to Unit holders in the interim period prior to any distribution resulting from the sale of the Trust’s assets.

The Trustee has retained Stifel, Nicolaus & Company, Incorporated, a nationally recognized investment banking firm, (the “Financial Advisor”), to market the Trust’s assets. However, as announced by the Trustee on October 22, 2008, the Trustee previously determined that, in light of market conditions at that time, it was in the best interests of the Trust Unit holders to postpone the sale of the Trust’s assets for an indefinite period of time. The Trustee recommenced the marketing efforts in 2010. The Financial Advisor marketed the Trust’s assets and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the assets in accordance with the terms of the Trust Agreement. However, as previously announced, in November 2010 the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan. Mr. Beckett’s Complaint seeks a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also makes a number of other allegations and seeks removal of the Trustee and other relief. ~~On July 7, 2011,~~ Mr. Beckett and the Trust entered into a settlement agreement pursuant to which Mr. Beckett agreed to dismiss his lawsuit with prejudice within ten days after the Trust holds a meeting of the Unit holders for the purpose of voting on a proposal to remove the Trustee and to appoint a successor trustee of the Trust, provided that notice of the meeting is mailed by August 1, 2011 and the meeting occurs by September 1, 2011. Notice of the meeting was mailed prior to August 1, 2011, and the meeting was convened on August 12, 2011. Because the proposed successor trustee withdrew its consent to serve shortly prior to the meeting, the meeting has been adjourned until August 24, 2011.

~~The~~As ~~Trust Agreement~~a ~~provides~~result ~~that~~of ifthe ~~any~~Beckett ~~asset~~lawsuit, ~~required~~certain toof the bidders who behad ~~sold~~submitted ~~has~~preliminary ~~not~~indications ~~been~~of ~~sold~~interest byin ~~December 31,~~purchasing the ~~2010,~~Trust’s ~~the~~remaining ~~Trustee~~assets indicated that they were isunwilling to ~~cause~~proceed with the ~~asset~~purchase toof bethe ~~sold~~Jay atField ~~public~~interest from ~~auction~~the toTrust until the ~~highest~~ ~~cash~~Beckett ~~bidder.~~lawsuit was resolved. Consequently, ~~except~~as topreviously ~~the~~disclosed ~~extent~~in ~~that~~ the Trust’s public filings, the Trustee issuspended ~~removed~~the orsale isprocess ~~otherwise~~pending ~~prevented~~a resolution ~~from~~of ~~doing~~the solawsuit. On March 4, 2011 the Court ~~Trustee~~entered ~~will~~a ~~auction~~stipulated order in which the Trust’s voluntarily agreed that the Trust would not sell any assets. Inof ~~connection~~the ~~with~~Trust until at least such time as the ~~auction,~~Court entered an order dismissing or transferring the ~~Trustee~~case ~~will~~or ~~mail~~preliminarily ~~notice~~enjoining the sale of the assets. The Trustee filed a ~~public~~Motion ~~auction~~to Dismiss for Failure to ~~all~~Join ~~Unit~~Required ~~holders~~Parties, ator, ~~least~~in ~~30 days~~the ~~prior~~Alternative, to ~~any~~Transfer ~~such~~Venue ~~auction.~~with Nothe ~~approval~~Court seeking dismissal of the ~~Unit~~suit and/or transfer ~~holders~~of ~~will~~the besuit ~~required~~to inthe United States District Court ~~connection~~for ~~with~~ the ~~sale~~Western District of ~~the Trust’s assets~~Texas.

AsOn ~~of September~~July 307, ~~2010~~2011, Mr. Beckett and the Trust ~~had~~entered into $3a settlement agreement pursuant to which Mr. Beckett agreed to dismiss his lawsuit with prejudice within ten days after the Trust held a meeting of the Unitholders for the purpose of appointing Premier Bank & Trust,~~223~~ inNational Association, ~~cash~~as ~~and~~successor trustee, provided that notice of the Meeting was ~~holding~~mailed ~~unpaid~~by ~~invoices~~August 1, ~~for~~2011 ~~administrative~~and ~~services~~the ~~totaling~~Meeting ~~approximately~~occurred ~~$566~~by September 1,~~311~~ 2011. The notice of the meeting

-2415-

Asto ofappoint ~~August 19,~~Premier ~~2011,~~was ~~the~~mailed ~~Trust had no cash except for the cash advanced to the Trust~~ by ~~BNY Mellon, as affiliate of the Trustee, as an interest-free advance to enable the Trust to pay administrative expenses. As of~~ August 191, 2011, ~~the~~and ~~total~~the ~~amount~~meeting ~~advanced~~ to ~~the~~appoint ~~Trust~~Premier ~~(the~~occurred ~~“Bank Advance”)~~ by ~~the~~ ~~Bank was $2,255,520, of which $161,217 remained available to pay expenses at August~~September 191, 2011. ~~However, at~~ ~~August 19~~However, ~~2011,~~Premier inrefused ~~addition~~ to ~~the~~accept ~~amount~~its ~~owed~~appointment, ~~to the~~and ~~Bank,~~Mr. Beckett ~~the~~has ~~Trust~~asserted ~~was~~that ~~also~~the ~~holding~~settlement ~~unpaid~~agreement ~~invoices for~~did ~~administrative~~not ~~services~~require ~~totaling~~him ~~$443,492.~~to ~~See~~dismiss ~~Management’s Discussion~~his ~~and Analysis~~lawsuit.

Although the Trustee believes that the settlement agreement clearly required the dismissal of the Beckett lawsuit, the Trustee has called a second meeting of the Unitholders for the purpose of voting on a proposal by Mr. Beckett to appoint James E. Barlett as successor trustee. In connection with the calling of the second meeting, Mr. Beckett dismissed his lawsuit with prejudice.

The Trust Agreement provides that if any asset required to be sold has not been sold by December 31, 2010, the Trustee is to cause the asset to be sold at public auction to the highest cash bidder. Consequently, unless replaced or otherwise prevented from doing so, the Trustee intends to auction the remaining Trust assets in accordance with the Trust Agreement. The Trustee will mail notice of any public auction to all Unit holders at least 30 days prior to any such auction in accordance with the Trust Agreement. No approval of the Unit holders will be required in connection with the sale of the Trust’s assets.

As of March 31, 2011, the Trust had $557,307 in cash, was holding unpaid invoices for administrative services totaling approximately $1,449,859 and owed $1,144,310 to BNY Mellon for the Bank Advance.

As of October 20, 2011, the Trust had no cash except for the cash advanced to the Trust by BNY Mellon, as affiliate of the Trustee, as an interest-free advance to enable the Trust to pay administrative expenses. As of October 20, 2011, the total amount advanced to the Trust (the “Bank Advance”) by the Bank was $2,379,347, of which $9,968 remained available to pay expenses at October 20-, 2011. However, at October 20, 2011, in addition to the amount owed to the Bank, the Trust was also holding unpaid invoices for administrative services totaling $509,362.

The entire amount of the Bank Advance and all other liabilities and expenses of the Trust must be repaid before any distributions can be made to Unit holders.

During 2010 the Trust did not receive any royalty revenue except for $10,064 from the Fee Lands (which were sold in November 2009) and for $223,910 received in 2010 as an adjustment resulting from a review conducted by an independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of the net proceeds properly payable to the Trust with respect to the Jay Field Property. The adjustment related to the Working Interest Owner’s calculation of the net proceeds from the acquisition of the Jay Field working interest by Quantum Resources Management, LLC in 2007 through August 2008. The portion of the adjustment related to 2007, even if received in 2007, would not have affected the termination of the Trust in accordance with the terms of the Trust Agreement.

~~During~~For ~~2009,~~ the ~~only~~first ~~royalty~~quarter ~~revenue~~of 2011, the Trust ~~received~~did ~~was~~not receive any ~~$737,199~~royalty ~~with~~revenue. ~~respect~~The toJay ~~the~~Field, South Pass 89 ~~property~~ and ~~$70,905~~Offshore ~~from~~Louisiana ~~the~~properties ~~Fee~~excess ~~Lands.~~production Incosts ~~addition,~~as ~~on November~~of March 1131, ~~2009~~2011 were approximately $13,793,000, ~~the~~$1,130,000 ~~Trust~~and ~~sold~~$2,540,000, ~~its~~respectively ~~interest~~The inexcess ~~the~~production ~~south~~costs ~~Louisiana~~as ~~acreage described~~of inMarch 31, ~~the~~2010 ~~Trust’s~~were ~~public~~approximately ~~filings~~$14,938,000 as, ~~the~~$678,000 and ~~“Fee~~$3,064,000, ~~Lands”~~respectively. The ~~sale~~excess ~~resulted~~production incosts ~~cash~~must be ~~proceeds~~recovered toby the ~~Trust,~~Working ~~net~~Interest ofOwners ~~fees~~before ofany ~~$24,828~~distribution ~~paid~~of toroyalty ~~the~~income ~~auction~~will ~~company~~be ~~that~~made ~~conducted~~to the ~~sale, of approximately $500,000~~Trust.

~~During 2008, the Trust received a single payment of~~ ~~approximately $437,000 as a result of a review conducted by an~~-16- independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of amounts relevant to the determination of the net proceeds properly payable to the Trust with respect to the inadvertent inclusion of sulfur extraction processing costs at the Jay and Little Escambia Creek Field Unit desulfurization plant in the calculation of Jay Field Gross Proceeds. The only other royalty revenue the Trust received in 2008 was $204,741 attributable to the Fee Lands Royalties and $37,239 attributable to South Pass 89.

For the first nine months of 2010, the Trust did not receive any royalty revenue associated with Offshore Louisiana or South Pass 89 properties. During the first nine months of 2010, the Trust received a royalty income of $233,909 and $10,064 with respect to the Jay Field and Fee Land properties. During the first nine months of 2009, the Trust did not receive any royalty revenue associated with Offshore Louisiana and Jay Fields properties. For the first nine months of 2009, the Trust received $737,199 and $57,818 of royalty revenue from South Pass 89 and Fee Lands, respectively.

For the first nine months of 2010, the Working Interest Owner received insurance recovery proceeds of $32,746 and $1,448,205 for South Pass 89 and Offshore Louisiana properties, respectively. During the first nine months of 2009, the Working Interest Owner received insurance recovery proceeds of $927,814 for South Pass 89, a portion of which was applied to accumulated excess production costs and current period production costs. The remaining insurance proceeds combined with royalty revenues resulted in net royalty income of $737,199 to the Trust for South Pass 89 during the first nine months of 2009. In addition, the Working Interest Owner received insurance recovery proceeds of $9,113,272 for Offshore Louisiana which was applied to reduce a portion of the

-25-

For the first quarter of 2010, the Trust’s ~~accumulated~~did ~~excess~~not ~~production~~receive ~~costs~~any royalty ~~for~~revenue ~~this~~associated with the Jay Field, South Pass 89, or ~~property~~Offshore Louisiana properties. The Trust only received no$9,199 ~~royalties~~of royalty ~~for~~income ~~Offshore~~from ~~Louisiana and~~the ~~Jay~~Fee ~~Field~~Land ~~properties~~property ~~during~~in the first ~~nine months~~ quarter of ~~2009.~~2010

The Jay Field, South Pass 89 and Offshore Louisiana properties excess production costs as of September 30, 2010 were approximately $13,103,000, $411,000 and $1,004,000, respectively. The excess production costs as of December 31, 2009 were approximately $12,889,000, $373,000 and $3,226,000, respectively. The excess production costs as of December 31, 2010 were approximately $13,588,000, $868,000, and $2,171,000 respectively. The excess production costs must be recovered by the Working Interest Owners before any distribution of royalty revenues will be made to the Trust with respect to the particular property.

As previously described in the Trust’s filings, in addition to the Working Interest Owners’ rights to recover Excess Production Costs prior to making payments to the Trust, the Working Interest Owners have the right under the Conveyances to escrow or withhold amounts for certain anticipated future expenses, and the Working Interest Owners have done so and expect to continue doing so in the future. Under the Conveyance, the Working Interest Owners may compute the Royalties without establishing actual third party escrows of withheld funds.

As previously announced, in early February 2009 the Trust received a letter from Quantum Resources Management LLC addressed to all Jay Field royalty interest owners stating that Quantum had temporarily suspended production from the Jay Field on December 22, 2008. The letter stated that Quantum’s decision to suspend production resulted from the dramatic decline in oil prices coupled with high operating expenses. The letter from Quantum noted that as operator of the Jay Field, Quantum was facing three major issues: declining production, increased costs, and significantly lower oil prices. The letter also stated that Quantum’s long term goal for the Jay Field was to economically produce the maximum amount of reserves, and noted that when Quantum temporarily suspended production, it maintained the capability to reestablish production at a future date. As previously announced, production at Jay Field resumed in December 2009.

As a result of a review by an independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of amounts relevant to the determination of the net proceeds properly payable to the Trust under the Conveyances, the Trustee and the Working Interest Owner concluded that the Working Interest Owner had inadvertently included sulfur extraction processing costs at the Jay and Little Escambia Creek Field Unit desulfurization plant in the calculation of Jay Field Gross Proceeds. Because neither the Trustee’s oil and gas accounting firm nor the Working Interest Owner was able to quantify the amount of the sulfur extraction costs inadvertently included, the Trustee requested that the Working Interest Owner pay to the Trust royalties on the revenue generated by the sale of the sulfur in lieu of refunding the amount charged to the Trust’s interest. The Trustee engaged an independent joint venture auditor to review payments to the Trust for a portion of the Trust

-26-

properties as part of the termination of the Trust. The joint interest auditor reviewed the period from January 2004 through December 2007. As a result of the review, one of the Working Interest Owners made a payment of approximately $437,000 in March 2008 to the Trust to settle certain issues identified. In addition, the independent joint interest auditor has recently completed reviews of the working interest owner’s calculations relating to the Trust’s interest in the Jay Field. See “Recent Developments.”

Hurricane Damages

During 2005, Hurricanes Katrina and Rita affected the operational status of properties included in the Offshore Louisiana and South Pass 89 groups of properties,. ~~and~~There ~~Hurricane~~has been ~~Dennis~~no ~~and~~material ~~Tropical~~change ~~Storm~~in ~~Cindy affected~~ the ~~operational~~ status of the ~~gas~~information ~~plant~~provided ~~at Jay Field. The gas plant at Jay Field returned~~ to ~~full operating status on April 13, 2006.~~ ~~However, distributions to~~ the ~~Trust~~Trustee ~~have~~by ~~been reduced significantly as a result of~~ the ~~damage~~Working ~~from~~Interest ~~these~~owners ~~storms~~and toset ~~the production~~forth ~~facilities for properties~~ in ~~which~~ the ~~Trust has an~~ ~~interest.~~Trust’s AsAnnual aReport ~~result of the uncertainty of future proceeds from~~on ~~these properties, the Trustee as of September~~Form ~~30, 2010 has~~10-K ~~reserved $3,233 that otherwise would have been distributed to the unitholders~~ for the ~~payment~~year ofended ~~the~~December 31, ~~Trust’s~~2010 ~~likely expenses~~regarding in the ~~foreseeable future. The Trustee intends to hold~~ ~~these~~hurricane ~~funds for use in the payment of future Trust expenses until it becomes reasonably clear that they are no longer necessary~~damages.

Following is a description of the damage caused by Hurricanes Katrina and Rita to production facilities for properties in which the Trust has an interest. This information is based on assessments of damage the Working Interest Owner has received regarding damage from Hurricanes Katrina and Rita to the Offshore Louisiana and South Pass 89 properties. All of the information in this Report on Form 10-K relating to the operational status of the properties provided to the Working Interest Owner by the various operators of the properties in which the Trust has an interest, and was provided to the Trust by the Working Interest Owner. The Working Interest Owner is not the operator of any of these properties, and relies on the various operators for information regarding the operational status of the various properties. Consequently, all of the information provided herein is based on preliminary and sometimes informal information provided by the operators of the Properties. The information provided herein is based on the respective operators’ assessments of the damage to the production facilities.

South Pass 89

Offshore Louisiana Properties:

East Cameron 336

-27-

removal. It is estimated that the platform removal and abandonment will cost an additional $4,000,000 ($800,000 net to the Trust).

East Cameron 195

South Marsh Island 76

Eugene Island 261

Vermillion 331

Jay Field

In December 2006, the Working Interest Owner and ExxonMobil, as the operator of the Jay Field, sold their respective interests in the field to Quantum Resource Management LLC (Quantum). Quantum became the operator in April 2007. As described above under “Recent Developments,” Quantum suspended production from the Jay Field on December 22, 2008. Production resumed in December 2009.

-28-

Other

The Working Interest Owner has further informed the Trustee that although the work to secure and repair or replace damaged equipment and restore production at properties the operators have determined to repair has now been completed, work nevertheless remains ongoing to secure, plug, abandon and dismantle other properties in which the Trust has an interest and that the operators have determined to abandon. In particular, the work and expenses to plug, abandon and dismantle the facilities at South Marsh Island 76 and East Cameron 195 are expected to continue. The Working Interest Owner has informed the Trustee that these ongoing expenses are not insured.

The abandonment and repair costs have had a material adverse effect on royalties payable from the South Pass 89 and Offshore Louisiana properties to the Trust, and from the Trust to Unit holders. As previously disclosed, the Working Interest Owner began escrowing funds otherwise distributable to the Trust from the South Pass 89 property and Offshore Louisiana properties, beginning with the April 2006 monthly distribution. Consequently, distributions from the Trust to the Unit holders have been eliminated for a period of time. The Trustee does not expect to make any further distribution prior to a final liquidating distribution (if any) after the sale of the Trust’s interests.

Liquidity and Capital Resources

As stipulated in the Trust Agreement, the Trust is intended to be passive, and the Trustee’s activities are limited to the receipt of revenues attributable to the Royalties, which revenues are to be distributed currently (after payment of or provision for Trust expenses and liabilities) to the owners of the Units. Except for the bank advance described in this report, the Trust has no source of liquidity or capital resources other than the revenue, if any, attributable to the Royalties.

The Working Interest Owners, under the terms of the Trust Conveyances, are permitted to escrow funds (or to calculate the royalties as though they had done so) from the Productive Properties for estimated future costs such as dismantlement costs and capital expenditures. According to the reserve report as of September 30, 2010, dated June 8, 2011, included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010, the total future dismantlement costs to the Working Interest Owners are estimated to be $16,100,000 for the Jay Field property, $11,300,000 for the South Pass 89 property, and $10,600,000 for the Offshore Louisiana property. These estimates are provided to the independent engineers by the Working Interest Owners. The Trust’s interests in these properties are equivalent to 50% of the net proceeds from Jay Field and South Pass 89 properties and 90% of the net proceeds from the Offshore Louisiana property. Please see the reserve report as of September 30, 2010 ~~filed as an exhibit to this Form 10-Q for more recent information~~. ~~The Trust’s interests in these~~ ~~properties are equivalent to~~

The cumulative Offshore Louisiana escrow balance (which is held ~~-29-~~by the Working Interest Owner and is not segregated) as of March 31, 2011 was $8,366,523. The Offshore Louisiana Working Interest Owner expects to utilize all such amount in payment of a portion of the Trust’s share of Offshore Louisiana dismantlement costs. Under the conveyances, the Offshore Louisiana Working Interest Owner was and remains entitled to escrow or otherwise set aside substantially more than it has for Offshore Louisiana dismantlement costs. If the amounts escrowed or otherwise set aside are inadequate to pay the Trust’s share of the dismantlement costs, the Trust is not liable for the additional amounts. Assuming that the Offshore Louisiana Working Interest Owner has recovered all excess production costs, then, after the payment of the dismantlement costs, 90 percent of any funds remaining in

-17-

~~50%~~“escrow” ofwould be distributable to the ~~net~~Trust. ~~proceeds~~However, the ~~from~~estimated ~~Jay~~Offshore ~~Field~~Louisiana ~~and~~dismantlement ~~South~~costs ~~Pass~~exceed 89the ~~properties~~escrowed ~~and~~amounts ~~90%~~substantially, ofand ~~the~~no ~~net~~such ~~proceeds~~distributions ~~from the Offshore~~are ~~Louisiana property~~likely.

The cumulative ~~Offshore Louisiana~~ escrow balance (which is held by the Working Interest Owner and is not segregated) as of ~~September~~ March 3031, ~~2010~~ 2011 was $106,~~535~~031,~~034~~679 for the Jay Field property. The ~~Offshore~~Jay ~~Louisiana~~Field Working ~~Working~~ Interest Owner expects to utilize all such amount in payment of a portion of the Trust’s share of ~~Offshore Louisiana~~Jay ~~dismantlement~~Field dismantlement costs. Under the conveyances, the ~~Offshore~~ ~~Louisiana~~Jay Field Working Interest Owner was and remains entitled to escrow or otherwise set aside substantially more than it has for ~~Offshore~~Jay ~~Louisiana~~Field dismantlement costs. If the amounts escrowed or otherwise set aside are inadequate to pay the Trust’s share of the dismantlement costs, the Trust is not liable for the additional amounts. Assuming that the ~~Offshore~~ ~~Louisiana~~Jay Field Working Interest Owner has recovered ~~all~~ all excess production costs, then, after the payment of the dismantlement costs, 9050 percent of any funds remaining in “escrow” would be distributable to the Trust. However, the estimated ~~Offshore~~Jay ~~Louisiana~~Field dismantlement costs exceed the escrowed ~~escrowed~~ amounts substantially, and no such distributions are likely.

The cumulative escrow balance (which is held by the Working Interest Owner and is not segregated) as of ~~September~~March 3031, 2011 ~~2010~~ was $410,~~543~~186,~~402~~513 for the ~~Jay~~South ~~Field~~Pass 89 property. The ~~Jay~~South ~~Field~~Pass 89 Working Interest Owner expects to utilize all such amount in payment of a portion of the Trust’s share of ~~Jay~~South ~~Field~~Pass 89 dismantlement costs. Under the conveyances, the ~~Jay~~South ~~Field~~Pass 89 Working Interest Owner was and remains entitled to escrow or otherwise set aside substantially more than it has for ~~Jay Field~~South Pass 89 dismantlement costs. If the amounts escrowed or otherwise set aside are inadequate to pay the Trust’s share of the dismantlement costs, the Trust is not liable for the ~~additional~~ additional amounts. Assuming that the ~~Jay~~South ~~Field~~Pass ~~Working~~89 Working Interest Owner has recovered all excess production costs, then, after the payment of the dismantlement costs, 50 percent of any funds remaining in “escrow” would be distributable to the Trust. However, the estimated ~~Jay~~South ~~Field~~Pass ~~dismantlement~~89 ~~costs~~dismantlement costs exceed the escrowed amounts substantially, and no such distributions are likely.

The ~~cumulative~~Conveyances ~~escrow~~prohibit ~~balance (which is held by~~ the Working Interest ~~Owner~~Owners ~~and is not segregated) as September 30, 2010~~from ~~was~~escrowing ~~$9,192,149~~additional funds for ~~the~~estimated ~~South~~future ~~Pass 89~~Special ~~property. The South~~Costs ~~Pass 89~~with ~~Working~~respect ~~Interest Owner expects~~ to ~~utilize~~a ~~all~~particular ~~such amount~~Productive inProperty ~~payment~~once ~~of a portion of~~ the ~~Trust’s share of~~amount ~~South~~escrowed ~~Pass 89~~exceeds ~~dismantlement~~125% ~~costs.~~of ~~Under~~ the ~~conveyances, the~~aggregate ~~South~~estimated ~~Pass 89~~future ~~Working Interest Owner was and remains~~Special ~~entitled~~Costs ~~to escrow or otherwise set aside substantially more than it has~~ for ~~South~~that ~~Pass 89~~Property. ~~dismantlement~~The ~~costs.~~Conveyances Ifpermit the Working ~~amounts~~Interest ~~escrowed~~Owners ~~or otherwise set aside are inadequate~~ to ~~pay the~~release ~~Trust’s~~funds ~~share~~from any of the ~~dismantlement~~Special ~~costs, the Trust is~~Costs ~~not~~escrows ~~liable~~at ~~for~~any ~~the~~time ~~additional~~if ~~amounts.~~it ~~Assuming~~determines ~~that~~in ~~the~~its ~~South Pass 89~~sole ~~Working~~discretion ~~Interest Owner has recovered all excess~~that ~~production~~there ~~costs,~~no ~~then,~~longer ~~after~~exists ~~the~~a ~~payment~~need offor ~~the~~escrowing ~~dismantlement costs,~~all ~~50 percent~~or of any ~~funds remaining in~~portion ~~“escrow”~~of ~~would~~such ~~be distributable to the Trust~~funds. However, the ~~estimated~~Working ~~South~~Interest ~~Pass 89~~Owners ~~dismantlement~~are ~~costs exceed the~~not ~~escrowed~~required ~~amounts~~to ~~substantially,~~do ~~and no such distributions are likely~~so.

The conveyances do not require the Working Interest Owners to place the “escrowed” funds into an actual escrow account or to segregate funds in any other manner, and neither of the ~~working~~Working ~~interest~~Interest ~~owners~~Owners has done so. However, under the conveyances, each Working Interest Owner (or any successor owner of the working interest) is required to calculate Gross Proceeds as though such funds had been escrowed and then subsequently utilized for purposes of paying actual abandonment and related costs. Quantum began withholding additional funds under these provisions in the Trust’s accounting month of December 2010. Information furnished by Quantum to the Trust for production month ~~April~~June 2011 and Trust accounting month ~~July 2011~~September 2011 indicates that 125% of Quantum’s current estimate of ~~these~~ these costs is approximately $2625,500,000 and that the amount ~~withheld~~ withheld in escrow is $812,~~900~~400,000.

-30-

The Working Interest Owners have advised the Trustee that they intend to escrow any amounts otherwise distributable to the Trust to the extent permitted to do so by the conveyances.

~~Results~~ ~~of Operation~~-18-

	Third Quarter						First Nine Months
	2010			2009			2010			2009
Royalty revenues	$	50		$	225,534		$	233,974		$	795,017
Trust administrative expenses		(236,276	)		(226,573	)		(675,492	)		(794,015	)
Cash earnings (deficit)		(236,276	)		(1,039	)		(441,518	)		1,002
Change in undistributed cash		236,276			1,039			441,518			(1,002	)
Cash distributions	$	—		$	—		$	—		$	—
Cash distributions per unit	$	—		$	—		$	—		$	—
Units of beneficial interest		18,991,304			18,991,304			18,991,304			18,991,304

Revenues are generally received in the third month following the month of production of oil and gas attributable to the Trust’s interest. Both revenues and Trust expenses are recorded on a cash basis. Accordingly, distributions to Unit holders for the three-month and nine-month periods ended September 30, 2010 and 2009 (the 2010 and 2009 “Third Quarters” and “First Nine Months”, respectively) are attributable to the Working Interest Owners’ operations during the periods April through June (the “Three-Month Operating Periods”) of 2010 and 2009, respectively, and the periods October 2009 through June 2010 and October 2008 through June 2009 (the 2010 and 2009 “Nine-Month Operating Periods”, respectively).

There were no distributions made to the Unit holders for the nine months ended September 30, 2010 or for the nine months ended September 30, 2009. As a result of the uncertainty of future proceeds from properties in which the Trust has an interest, the Trustee has reserved $3,223 in proceeds that otherwise would have been distributed to the Unit holders for the payment of the Trust’s likely expenses in the foreseeable future. The Trustee intends to hold these funds for use in the payment of future Trust expenses until it becomes reasonably clear that they are no longer necessary. During the Third Quarter 2010 and 2009, the Trust received cash of $50 and $225,534, respectively, from the Working Interest Owners with respect to the Royalties from the Properties.

The monthly per Unit distributions during the 2010 and 2009 Third Quarters were as follow:

	2010		2009
July	$	.0000	$	.0000
August		.0000		.0000
September		.0000		.0000
	$	.0000	$	.0000

-31-

~~The following unaudited schedules provide summaries of the~~ ~~Working Interest Owners’ calculations of the Net Proceeds~~Results ~~from the Properties and the Royalties paid to the Trust for the Third Quarter and First Nine Months~~ of ~~2010:~~Operations

Third Quarter 2010


	Three Months Ended March 31,
	2011			2010

Royalty revenues	$	—		$	9,199
Trust administrative expenses		(7,170	)		(413,903	)

Cash earnings	$	(7,170	)	$	(404,704	)
Changes in undistributed cash		7,170			404,704

Cash distributions	$	—		$	—

Cash distributions per unit	$	0.0000		$	0.0000

Units outstanding		18,991,304			18,991,304

				South			Offshore
	Jay Field			Pass 89			Louisiana			Total
Revenues:
Liquids	$	4,586,001		$	533,021		$	517,828		$	5,636,850
Sulfur		62,509			—			—			62,509
Gas		—			—			128,750			128,750
Other		—			—			45,000			45,000
		4,648,510			533,021			691,578			5,873,109
Amounts withheld in escrow(4)		—			(533,021	)		(691,578	)		(1,224,599	)
Production costs and expenses(1)		(3,240,260	)		(26,686	)		21,081			(3,245,865	)
Insurance recovery proceeds		—			32,746			1,448,205			1,480,951
Capital expenditures		(1,037,582	)		—			—			(1,037,582	)
Net Proceeds	$	370,668		$	6,060		$	1,469,286		$	1,846,014
Overriding Royalties paid to the Trust(2)	$	—		$	—		$	—		$	—
Fee Lands Royalties											50
Other Proceeds Paid to the Trust											—
Royalties paid to the Trust										$	50

Revenues are generally received in the third month following the month of production of oil and gas attributable to the Trust’s interest. Both revenues and Trust expenses are recorded on a cash basis. Accordingly, distributions to Unit holders for the three-month periods ended March 31, 2011 and 2010 (the 2011 and 2010 “First Quarters”, respectively) are attributable to the Working Interest Owner’s operations during the periods October through December of 2010 (the “Current Operating Period”) and October through December of 2009 (the “Prior Year’s Operating Period”), respectively.

There were no distributions to the Unit holders for the three ~~-32-~~months ended March 31, 2011 or for the three months ended March 31, 2010. As of March 31, 2011, the Trust had $557,307 in cash and had substantial unpaid administrative expenses. During the three months ended March 31, 2011 and 2010, the Trust received cash of $0 and $9,199, respectively, from the Working Interest Owners with respect to the Royalties and other proceeds from the Properties.

-19-

The following unaudited schedules provide summaries of the ~~First~~Working Interest Owner’s calculation of the Net Proceeds ~~Nine~~from ~~Months~~the Properties and the Royalties paid to the Trust for the First Quarters of 2011 and 2010:

				South			Offshore
	Jay Field			Pass 89			Louisiana			Total
Revenues:
Liquids	$	8,773,699		$	1,859,521		$	1,713,421		$	12,346,641
Sulfur		126,457			—			—			126,457
Natural gas		—			(10,016	)		1,072,664			1,062,648
Other		—			—			45,000			45,000
		8,900,156			1,849,505			2,831,085			13,580,746
Amounts withheld in escrow(4)		—			(1,849,505	)		(2,831,085	)		(4,680,590	)
Production costs and expenses(1)		(7,642,699	)		(54,211	)		774,867			(6,922,043	)
Insurance recovery proceeds		—			32,746			1,448,205			1,480,951
Capital expenditures		(2,124,128	)		(16,180	)		—			(2,140,308	)
Net Proceeds	$	(866,671	)	$	(37,645	)	$	2,223,071		$	1,318,756
Overriding Royalties paid to the Trust(2)	$	—		$	—		$	—		$	—
Fee Lands Royalties											10,064
Other Proceeds Paid to the Trust(3)											223,910
Royalties paid to the Trust										$	233,974

First Quarter 2011

(1) Interest earned on funds escrowed for estimated future dismantlement costs are reported as a reduction of production costs and expenses. Interest earned for the 2010 Third Quarter and 2010 First Nine Months was $162,915 and $558,774, respectively. Pursuant to the terms of the Trust Conveyances, interest earned on the escrowed funds for any month will be calculated at an interest rate equal to 80% of the median between the Prime Rate at the end of such month and the Prime Rate at the end of the preceding month.


				South			Offshore
	Jay Field			Pass 89			Louisiana			Total

Revenues:
Liquids	$	6,588,008		$	611,621		$	521,884		$	7,721,513
Sulfer		121,681			—			—			121,681
Natural gas		—			—			56,876			56,876

	$	6,709,689			611,621		$	578,760		$	7,900,070
Amounts withheld in escrow(3)		(1,488,276	)		(611,621	)		(578,760	)		(2,678,657	)
Production costs and expenses(1)		(3,256,748	)		(261,170	)		(369,063	)		(3,886,981	)
Capital expenditures		(2,135,004	)		—			—			(2,135,004	)

Net Proceeds	$	(170,339	)	$	(261,170	)	$	(369,063	)	$	(800,572	)

Overriding Royalties paid to the Trust(2)	$	—		$	—		$	—		$	—

Fee Lands Royalties											—

Royalties paid to the Trust										$	—

Processing fees earned on the South Pass 89 properties are shown as a reduction of production costs and expenses. For the 2010 Third Quarter, production costs and expenses include processing fee income of $46,449. For the First Nine Months of 2010, South Pass 89 processing fees earned were $231,048.


(1)		Interest earned on funds escrowed for estimated future dismantlement costs are reported as a reduction of production costs and expenses. Interest earned for the 2011 First Quarter was $149,932. Pursuant to the terms of the Trust Conveyances, interest earned on the escrowed funds for any month will be calculated at an interest rate equal to 80% of the median between the Prime Rate at the end of such month and the Prime Rate at the end of the preceding month.

		Processing fees earned are shown as a reduction of production costs and expenses. For the three months ended March 31, 2011, South Pass 89 property processing fees totaled $158,102.

(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in a subsequent monthly operating periods, the Overriding Royalties paid to the Trust may not agree to the Trust’s royalty income in the Net Proceeds.

(3)		The working interest owner is routinely subject to joint interest audits of the royalty interest computations. Given such, the referenced amounts withheld in escrow are for royalty computation purposes and do not reflect subsequent audit adjustments to escrow balances; subsequent escrow audit adjustments have no effect on royalty payments already made.

(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in a subsequent monthly operating periods, the Overriding Royalties paid to the Trust may not agree to the Trust’s royalty interest in the Net Proceeds.
(3)		In the second quarter 2010, the Trust received a single payment of $223,910 as a result of a review conducted by an independent oil and gas accounting firm retained by the Trustee to review the Working Interest Owner’s calculation of amounts relevant to the determination of the net proceeds properly payable to the Trust under the Conveyances.
(4)		The working interest owner is routinely subject to joint interest audits of the royalty interest computations. Given such, the referenced amounts withheld in escrow are for royalty computation purposes and do not reflect

-20-

-33-

~~subsequent~~ First Quarter ~~audit adjustments to escrow balances; subsequent escrow audit adjustments have no effect on royalty payments already made.~~2010

The following unaudited schedules provide summaries of the Working Interest Owners’ calculations of the Net Proceeds from the Properties and the Royalties paid to the Trust for the Third Quarter and First Nine Months of 2009:


				South			Offshore
	Jay Field			Pass 89			Louisiana			Total

Revenues:
Liquids	$	315,417		$	764,464		$	621,398		$	1,701,279
Sulfer		(1,196	)		—			—			(1,196	)
Natural gas		—			—			700,046			700,046

	$	314,221			764,464		$	1,321,444		$	2,400,129
Amounts withheld in escrow(3)		—			(764,464	)		(1,321,444	)		(2,085,908	)
Production costs and expenses(1)		(1,629,656	)		(288,381	)		161,888			(1,756,149	)
Capital expenditures		(732,777	)		(16,180	)		—			(748,957	)

Net Proceeds	$	(2,048,212	)	$	(304,561	)	$	161,888		$	(2,190,885	)

Overriding Royalties paid to the Trust(2)	$	—		$	—		$	—		$	—

Fee Lands Royalties											9,199

Royalties paid to the Trust										$	9,199

Third Quarter 2009


(1)		Interest earned on funds escrowed for estimated future dismantlement costs are reported as a reduction of production costs and expenses. Interest earned for the 2010 First Quarter was $131,758. Pursuant to the terms of the Trust Conveyances, interest earned on the escrowed funds for any month will be calculated at an interest rate equal to 80% of the median between the Prime Rate at the end of such month and the Prime Rate at the end of the preceding month.

		Processing fees earned are shown as a reduction of production costs and expenses. For the three months ended March 31, 2010, South Pass 89 property processing fees totaled $161,593.

(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in a subsequent monthly operating periods, the Overriding Royalties paid to the Trust may not agree to the Trust’s royalty income in the Net Proceeds.

(3)		The working interest owner is routinely subject to joint interest audits of the royalty interest computations. Given such, the referenced amounts withheld in escrow are for royalty computation purposes and do not reflect subsequent audit adjustments to escrow balances; subsequent escrow audit adjustments have no effect on royalty payments already made.

				South			Offshore
	Jay Field			Pass 89			Louisiana			Total
Revenues:
Liquids	$	989,720		$	646,680		$	419,377		$	2,055,777
Natural gas		—			—			42,612			42,612
		989,720			646,680			461,989			2,098,389
Amounts withheld in escrow(3)		—			—			(461,989	)		(461,989	)
Production costs and expenses(1)		(1,007,770	)		(189,932	)		(64,320	)		(1,262,022	)
Capital expenditures		(12,661	)		(2,021	)		—			(14,682	)
Net Proceeds	$	(30,711	)	$	454,727		$	(64,320	)	$	359,696
Overriding Royalties paid to the Trust(2)	$	—		$	210,751		$	—		$	210,751
Fee Lands Royalties											14,783
Royalties paid to the Trust										$	225,534

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-34-

The following unaudited schedule summarizes the Working Interest Owner’s calculation of the Net Proceeds from the Properties and the Royalties paid to the Trust for the First Quarters of ~~Nine~~2011 ~~Months~~and ~~2009~~2010

				South			Offshore
	First Quarter
	Jay Field			Pass 89			Louisiana			Total
	2011			2010
Revenues:
Net Proceeds:
Liquids	$	6,189,867		$	1,329,436		$	944,268		$	8,463,571
Revenues	$	7,900,070		$	2,400,129
Natural gas		—			(16,575	)		467,512			450,937
Insurance recovery other revenue		—			—
Other		—			—			1,275,000			1,275,000
Amounts withheld in escrow		(2,678,657	)		(2,085,908	)
		6,189,867			1,312,861			2,686,780			10,189,508
Production costs and expenses		(3,886,981	)		(1,756,149	)
Amounts withheld in escrow(3)		—			(—	)		(2,686,780	)		(2,686,780	)
Insurance recovery proceeds		—			—
Production costs and expenses(1)		(8,306,360	)		(701,838	)		(406,822	)		(9,415,020	)
Capital expenditures		(2,135,004	)		(748,957	)
Insurance recovery proceeds		—			927,814			9,113,272			10,041,086
Net Proceeds	$	(800,572	)	$	(2,190,855	)
Capital expenditures		(4,474,828			(7,941	)		(246,840	)		(4,729,609	)
Royalties paid to the Trust:
Net Proceeds	$	(6,591,321	)	$	1,530,896		$	8,459,610		$	3,399,185
Overriding Royalties	$	—		$	—
Overriding Royalties paid to the Trust(2)	$	—		$	737,199		$	—		$	737,199
Fee Lands Royalties		—			9,199
Fee Lands Royalties											57,818
Other Proceeds		—			—
Other Proceeds Paid to the Trust											—
Royalties paid to the Trust	$	—		$	9,199
Royalties paid to the Trust										$	795,017

~~(1)~~ Revenues ~~Interest~~of ~~earned~~the onWorking ~~funds~~Interest ~~escrowed~~Owners ~~for~~with ~~estimated~~respect ~~future~~to ~~dismantlement~~the Productive ~~costs~~Properties ~~are~~in ~~reported~~the asCurrent aOperating ~~reduction~~Period ofincreased 229% ~~production~~from ~~costs~~the ~~and~~Prior ~~expenses~~Year’s Operating Period. ~~Interest~~Average ~~earned~~crude oil, ~~for~~natural ~~the~~gas ~~2009~~liquids, ~~Third~~natural ~~Quarter~~gas and ~~2009~~sulfur ~~First~~prices ~~Nine~~received by ~~Months~~the ~~was~~Working ~~$136,787~~Interest ~~and~~Owners ~~$429,493,~~in ~~respectively.~~the ~~Pursuant~~Current Operating Period attributable to the ~~terms~~Productive ofProperties ~~the~~were ~~Trust~~$82.83 ~~Conveyances~~per barrel, ~~interest~~$53.38 ~~earned~~per onbarrel, ~~the~~$4.14 ~~escrowed~~per ~~funds~~thousand ~~for~~cubic ~~any~~feet (“mcf”) ~~month~~and ~~will~~$135.98 beper ~~calculated~~long atton, anrespectively. ~~interest~~In ~~rate equal to 80% of~~ the comparable ~~median~~2010 ~~between~~period, ~~the~~average ~~Prime~~crude ~~Rate~~oil, atnatural ~~the~~gas ~~end~~liquids and ofnatural ~~such~~gas ~~month~~prices ~~and~~were ~~the~~$73.59 ~~Prime~~per ~~Rate~~barrel, at$38.80 ~~the~~per ~~end~~barrel and of$5.53 ~~the~~per ~~preceding~~mcf, ~~month~~respectively.

~~Processing~~Imputed ~~fees~~production ~~earned~~attributable onto the ~~South~~Trust ~~Pass~~is 89calculated ~~properties are shown~~by asmultiplying athe ~~reduction~~gross of production ~~costs~~volumes ~~and~~attributable ~~expenses.~~to ~~For~~the Productive Properties by the ~~2009~~ratio of the net overriding ~~Third~~royalties ~~Quarter,~~paid ~~production~~to ~~costs~~the ~~and~~Trust ~~expenses~~to ~~include~~the ~~processing~~gross revenues attributable ~~fee~~to ~~income~~the ofProductive $—Properties. ~~For~~There was no imputed liquids production for the ~~First~~first ~~Nine~~quarter ~~Months~~2011 ofand ~~2009,~~2010. ~~South~~There was no ~~Pass~~imputed 89natural ~~processing~~gas ~~fees~~production ~~earned~~for ~~were~~the ~~$42,802~~first quarter of 2011 and 2010.

(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in a subsequent monthly operating periods, the Overriding Royalties paid to the Trust may not agree to the Trust’s royalty interest in the Net Proceeds.
(3)		The working interest owner is routinely subject to joint interest audits of the royalty interest computations. Given such, the referenced amounts withheld in escrow are for royalty computation purposes and do not reflect subsequent audit adjustments to escrow balances; subsequent escrow audit adjustments have no effect on royalty payments already made.

In the first quarter of 2011 and 2010, the Working Interest Owners reserved $2,678,656 and $2,085,908, respectively, in escrow for future estimated dismantlement costs.

Production costs and expenses incurred by the Working Interest ~~-35-~~Owners on the Productive Properties in the Current Operating Period increased greater than 100%. This was due to the fact that Q1 2011 contained a full quarter of operations while Q1 2010 contained one month of activity as production had been temporarily suspended through February 2010 at the Jay Field property.

Capital expenditures increased greater than 100% in the Current Operating Period compared to the same period in 2010. The increase in capital expenditures is primarily due to the design and installation of a new system at

-22-

~~The~~the ~~following~~Jay ~~unaudited~~Field ~~schedule~~property ~~provides~~in apreparation ~~summary~~to ofrestart the ~~Working~~ ~~Interest Owners’ calculations of the Net Proceeds~~NGL ~~from~~production the ~~Properties~~coming ~~and~~quarter ~~the~~that ~~Royalties~~was ~~paid~~previously ~~to the Trust for the~~suspended. ~~Third Quarter and First Nine Months of 2010 and 2009:~~

	Third Quarter						First Nine Months
	2010			2009			2010			2009
Net Proceeds:
Revenues	$	5,873,109		$	2,098,389		$	13,580,7465		$	10,189,508
Amounts withheld in escrow		(1,224,599	)		(461,989	)		(4,680,590	)		(2,686,780	)
Production costs and expenses		(3,245,865	)		(1,262,022	)		6,922,043	)		(9,415,020	)
Insurance recovery proceeds		1,480,951			—			1,480,951			10,041,086
Capital expenditures		(1,037,582	)		(14,682	)		(2,140,308	)		(4,729,609	)
Net Proceeds	$	1,846,014		$	359,696		$	1,318,756		$	3,399,185
Royalties paid to the Trust:
Overriding Royalties	$	—		$	210,751		$	—		$	737,199
Other proceeds paid to the Trust		—			—		$	223,910		$	—
Fee Lands Royalties		50			14,783			10,064			57,818
Royalties paid to the Trust	$	50		$	225,534		$	233,974		$	795,017

The Trustee has been informed that The Louisiana Land and Exploration Company or a subsidiary has been named as one of many defendants in certain lawsuits alleging the underpayment of royalties on the production of natural gas and natural gas liquids through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs in some of the lawsuits allege that the underpayment of royalties, among other things, resulted in false forms being filed by the Working Interest Owners with the Minerals Management Service, thereby violating the civil False Claims Act.

With respect to the Productive Properties in the Current Operating Period, revenues of the Working Interest Owners increased approximately 177% in the 2010 Three-Month Operating Period and increased approximately 32% in the 2010 Nine-Month Operating Period versus the comparable periods in 2009. Average crude oil, natural gas liquids and natural gas prices received by the Working Interest Owners in the 2010 Three-Month Operating Period attributable to the Productive Properties were $75.09 per barrel, $43.28 per barrel and $4.39 per thousand cubic feet (“mcf”), respectively. In the comparable 2009 period, average crude oil, natural gas liquids and natural gas prices were $110.75 per barrel, $57.86 per barrel and $2.83 per mcf, respectively. In the 2010 Nine-Month Operating Period, average crude oil, natural gas liquids and natural gas prices were $75.04 per barrel, $43.74 per barrel and $5.84 per mcf, respectively. In the comparable 2009 Nine-Month Operating Period, average crude oil, natural gas liquids and natural gas prices were $62.10 per barrel, $12.80 per barrel and $3.82 per mcf, respectively.

Imputed production attributable to the Trust is calculated by multiplying the gross production volumes attributable to the Productive Properties by the ratio of the net overriding royalties paid to the Trust to the gross revenues attributable to the Productive Properties. There was no imputed liquids production for either the 2010 or 2009 Nine-Month Operating Period. There were no imputed natural gas production for the 2010 or 2009 Nine-Month Operating Period.

In the first nine months of 2010 and 2009, the Working Interest Owners reserved $4,680,590 and $2,686,780, respectively, in escrow as a result of uncertainties related to oil and gas properties.

Production costs and expenses incurred by the Working Interest Owners on the Productive Properties increased approximately 157% in the 2010 Three-Month Operating Period and decreased approximately 26% the 2010 Nine-Month Operating Period, respectively, versus the comparable periods in 2009. The increase in the Three-Month Operating Period is primarily due to plant turnaround costs, gas purchases, workover costs and severance taxes, which

-36-

directly related to increased production in the Jay Field. The decrease in the Nine Month Operating Period is due to lease operating costs related to maintenance and clean up on the Jay Field property during 2009 compared to 2010.

Capital expenditures increased 697% in the 2010 Three-Month Operating Period and decreased 55% for the 2010 Nine-Month Operating Period versus the comparable periods in 2009. The increase in the Three-Month Operating Period is primarily due to replacement, repair, facility upgrade, and capital well work from two hurricane damages in the Jay Field. The decrease in the Nine-Month Operating Period is due to less capital costs on replacement, repair, facility upgrade, and capital well work in the Jay Field as it re-started production during 2010.

Insurance recovery proceeds increased 100% in the Three-Month Operating Period due to the receipt of $32,746 and $1,448,205 for South Pass 89 and Offshore Louisiana, respectively during the three months ended September 30, 2010. Insurance recovery proceeds decreased 85% due to the receipt of $927,814 and $9,113,272 for South Pass 89 and Offshore Louisiana, respectively, during the nine months ended September 30, 2009.

As noted previously, on November 11, 2009, the Trust sold its interest in the south Louisiana acreage described in the Trust’s public filings as the “Fee Lands”. The sale resulted in cash proceeds to the Trust, net of fees of $24,828 paid to the auction company that conducted the sale, of approximately $500,000.

The Trustee has been informed by ConocoPhillips that it or a subsidiary has been named as one of many defendants in certain lawsuits alleging the underpayment of royalties on the production of natural gas and natural gas liquids through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs in some of the lawsuits allege that the underpayment of royalties, among other things, resulted in false forms being filed by the Working Interest Owners with the Minerals Management Service, thereby violating the civil False Claims Act.

If the plaintiffs are successful in the matters described above, revenues to the Trust could decrease. A judgment or settlement could entitle the Working Interest Owners to reimbursements for past periods attributable to properties covered by the Trust’s interest. ConocoPhillips has informed the Trustee that, at this time, it is not able to reasonably estimate the amount of any potential loss or settlement allocable to the Trust’s interest.

The Trust is now required by the terms of the Trust Agreement to sell its assets and to liquidate. As previously disclosed, the Trustee engaged ~~the~~ Financial Advisor to to market the Trust’s assets in anticipation of a sale in accordance with the terms of the Trust Agreement. The Financial Advisor marketed the Trust’s assets and had received preliminary indications of interest in late 2010, and the Trustee intended to sell the assets in accordance with the terms of the Trust Agreement. However, as previously announced, in November 2010 the Trust and Trustee were named as defendants in a Complaint for Legal and Equitable Relief (the “Complaint”) filed by Jeff Beckett in the United States District Court for the Eastern District of Michigan. Mr. Beckett’s Complaint sought a judicial modification of the terms of the Trust Agreement governing the Trust, a judgment declaring that the termination provisions of the Trust Agreement do not apply and an order preventing the sale of the Trust’s assets. The Complaint also made a number of other allegations and sought removal of the Trustee and other relief.

As a result of Mr. Beckett’s lawsuit, the bidders who had submitted preliminary indications of interest to the Financial Advisor indicated that they were unwilling to proceed with the purchase of the Jay Field interest from the Trust until the Beckett lawsuit was resolved. Consequently, as previously disclosed, the Trustee suspended the sale process pending resolution of the lawsuit. Additional information regarding the status of the Beckett lawsuit and the status of the sale of the Trust’s assets is included in this report.

-37-

process pending resolution of the lawsuit. Additional information regarding the status of the Beckett lawsuit and the status of the sale of the Trust’s assets is included in this report.

For more recent information regarding all of these matters, please see the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010.

Assets and Liabilities in the Process of Liquidation

As a result of the contractual termination of the Trust effective December 31, 2007, the Trust is in the process of liquidation. The table below presents ~~the~~information ~~assets~~regarding of the ~~Trust~~ ~~and~~assets ~~their~~of ~~estimated fair value at September 30, 2009, based solely on~~ the ~~assessment described below~~Trust:

	September 30,
	2010
ASSETS
Cash	$	3,223
Cash at March 31, 2011	$	557,307
Net overriding royalty interests in oil and gas properties		0
Net Revenues Discounted at 10% per year per reserve report as of September 30, 2010		4,848,000
Net assets in process of liquidation	$	3,223

~~The~~Estimates of the proved oil and gas reserves and estimates of the future net ~~overriding~~revenues ~~royalty~~from ~~interest~~the inproved oil and gas ~~properties at~~reserves attributable to the Properties as of September 30, 2010 have ~~reflect~~been ~~the~~made ~~Trustee’s~~by ~~estimate~~Miller ofand Lents, Ltd. (“Miller and ~~value~~Lents”). ~~(in~~Based ~~the~~on ~~absence~~such ofestimates, ~~third-party~~Miller ~~appraisals~~and orLents ~~evaluations),~~has also ~~based~~calculated on the ~~Trust’s~~present ~~share~~value of the estimated future net ~~revenues~~ ~~from~~revenues to the ~~net~~Trust ~~overriding~~and ~~royalty~~the ~~interest~~imputed inreserves attributable to the ~~properties~~Trust as of September 3130, ~~2010.~~

~~As noted previously, on November 11, 2009, the Trust sold~~ ~~its interest in the south Louisiana acreage described in the~~-23- Trust’s public filings as the “Fee Lands”. The sale resulted in cash proceeds to the Trust, net of fees of $24,828 paid to the auction company that conducted the sale, of approximately $500,000. Additionally, the estimated fair value does not include any amounts related to the Jay Field, South Pass 89, or Offshore Louisiana properties. The estimated share for these properties is not economical per the oil and gas reserve report as of September 30, 2009, dated May 24, 2011.

TheTable actual net proceeds from the sales of oil and gas properties may vary substantially from these estimates in value due to changes in current and estimated future oil and gas prices, subsequent production, estimates of actual abandonment costs and other factors. Contents

~~For~~2010. ~~all~~A ~~other~~copy ~~assets~~of ~~presented~~the inMiller ~~the~~and ~~above~~Lents ~~table~~letter, ~~the~~dated ~~Trustee~~June 8, ~~believes~~2011, ~~that~~setting ~~historical~~forth ~~cost approximates fair market value due to the short-term nature of~~ such ~~assets. The Trustee will add any future distributions to previously established reserves to pay Trust expenses~~estimates, ~~which~~is ~~will~~filed ~~primarily consist of expenses~~as ~~incurred~~exhibit 99.2 ~~by the Trustee~~ to ~~liquidate~~ the Trust’s ~~assets.~~ ~~Any funds remaining after all expenses have been paid will be~~Form 10-K ~~distributed~~for to the ~~Unit~~year ~~holders~~ended December 31, 2010.

~~For~~Management ~~more~~is ~~information~~unable ~~regarding~~to estimate the ~~estimated~~fair ~~remaining~~value ~~life~~ of the ~~each~~properties ofat ~~the~~this ~~Royalty~~time ~~Properties~~due ~~and~~to the ~~estimated~~uncertain ~~future~~nature ~~net~~of the ~~revenues~~industry ofand the ~~Royalty~~complex ~~Properties~~nature ~~based~~of onthe ~~information~~calculation. ~~provided~~In lieu of bysuch calculation, the ~~Working~~Net ~~Interest~~Revenues ~~Owners~~as estimated in the reserve report have been used to ~~Miller~~estimate ~~and~~the ~~Lents,~~assets ~~see~~of the Trust. In ~~reserve~~addition, ~~reports~~the asactual net proceeds from the sales of ~~September 30,~~oil ~~2009,~~and ~~dated~~gas ~~May 24,~~properties ~~2011~~may vary substantially from these estimates in value due to changes in current and ~~September 30,~~estimated ~~2010,~~future ~~dated~~oil and gas ~~June 8~~prices, ~~2011~~subsequent production, ~~filed~~estimates asof ~~exhibits~~actual ~~to this~~abandonment ~~Form 10-Q~~costs and other factors.

For all other assets presented in the above table, the Trustee believes that historical cost approximates fair market value due to the short-term nature of such assets. The Trust has substantial unpaid expenses and liabilities. The Trustee will use any future revenues to pay Trust expenses. Any funds remaining after all expenses have been paid will be distributed to the Unit holders.

For more information regarding the estimated remaining life of each of the Royalty Properties and the estimated future net revenues of the Royalty Properties based on information provided by the Working Interest Owners to Miller and Lents, see the reserve report as of September 30, 2010 filed as an exhibit to the Trust’s Annual Report on Form 10-K.

Nothing herein should be interpreted as an assurance of the values of the assets held by the Trust. The actual value, if any, of such assets will be determined solely by the amount a buyer is willing to pay for the assets.

-3824-


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

The Trust does not engage in any operations, and does not utilize market risk sensitive instruments, either for trading purposes or for other than trading purposes. As described in detail elsewhere herein, the Trust’s monthly distributions are highly dependent upon the prices realized from the sale of natural gas. Natural gas prices can fluctuate widely on a month-to-month basis in response to a variety of factors that are beyond the control of the Trust and the ~~working~~Working ~~interest~~Interest ~~owner~~Owners. Factors that contribute to price fluctuation include, among others:

• political conditions worldwide, in particular political disruption, war or other armed conflict ~~in or affecting~~ oil producing regions; • worldwide economic conditions; • weather conditions~~, including hurricanes and tropical storms in the Gulf of Mexico~~; • the supply and price of foreign natural gas; • the level of consumer demand; • the price and availability of alternative fuels; • the proximity to, and capacity of, transportation facilities; and • the effect of worldwide energy conservation measures.

Moreover, government regulations, such as regulation of natural gas transportation and price controls, can affect product prices in the long term.


Item 4.	*Controls and Procedures*

The Trust maintains disclosure controls and procedures designed to ensure that information required to be disclosed by the Trust in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act is accumulated and communicated by the Working Interest Owners to the Trustee and its employees who participate in the preparation of the Trust’s periodic reports as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Trustee carried out an evaluation of the Trust’s disclosure controls and procedures. Mike Ulrich, as Trust Officer of the Trustee, has concluded that these controls and procedures were not effective to allow timely decisions regarding required disclosure. Because the Trust has terminated in accordance with the terms of the Trust Agreement and is required by the Trust Agreement to auction its assets, pay its expenses and distribute any remaining funds to Unit holders, the Trustee will not attempt to implement additional controls and procedures designed to ensure that information required to be disclosed by the Trust is accumulated and communicated to the Trustee on a timely basis.

Due to the contractual arrangements pursuant to which the Trust was created and the terms of the related Conveyances regarding information furnished by the Working Interest Owners, the Trustee relies on (i) information

-3925-

provided by the Working Interest Owners, including all information relating to the productive properties burdened by the Royalties, such as operating data, data regarding operating and capital expenditures, geological data relating to reserves, information regarding environmental and other conditions relating to the productive properties, liabilities and potential liabilities potentially affecting the revenues to the Trust’s interest, the effects of regulatory changes and of the compliance of the operators of the productive properties with applicable laws, rules and regulations, the number of producing wells and acreage, and plans for future operating and capital expenditures, and (ii) conclusions of independent reserve engineers regarding reserves. The conclusions of the independent reserve engineers are based on information received from the Working Interest Owners.

Changes in Control Over Financial Reporting. There has been no change in the Trustee’s internal control over financial reporting during the three months ended ~~September~~March 3031, ~~2010~~2011 that has materially ~~materially~~ affected, or is reasonably likely to materially affect, the Trustee’s internal control over financial reporting.

-4026-

PART II

OTHER INFORMATION

Item 1A. Risk Factors.

~~Except~~There ~~as set forth in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010, there~~ have been no material changes in the risk factors disclosed under Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010.

Item 6. Exhibits.

(a) Exhibits


4*		—	Trust Agreement for LL&E Royalty Trust, dated as of June 1, 1983, between the Company and First City National Bank of Houston, as Trustee.
28	.1*	—	Agreement of General Partnership of LL&E Royalty Partnership.
28	.3*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Alabama) Property.
28	.4*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Florida) Property.
28	.5*	—	Form of Conveyance of Overriding Royalty Interests for Offshore Louisiana Property.
28	.6*	—	Form of Conveyance of Overriding Royalty Interests for South Pass 89 Property.
28	.7*	—	Form of Royalty Deed.
31		—	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		—	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit
Number				Description
	4*		—	Trust Agreement for LL&E Royalty Trust, dated as of June 1, 1983, between the Company and First City National Bank of Houston, as Trustee.
	28	.1*	—	Agreement of General Partnership of LL&E Royalty Partnership.
	28	.3*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Alabama) Property.
	28	.4*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Florida) Property.
	28	.5*	—	Form of Conveyance of Overriding Royalty Interests for Offshore Louisiana Property.
	28	.6*	—	Form of Conveyance of Overriding Royalty Interests for South Pass 89 Property.
	28	.7*	—	Form of Royalty Deed.
	31		—	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32		—	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99	.1	—	Reserve Report as of September 30, 2009 dated May 24, 2011 prepared by Miller and Lents, Ltd. (incorporated by reference to exhibit 99.1 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission File No. 1-8518).
	99	.2	—	Reserve report as of September 30, 2010 dated March 28, 2011 prepared by Miller and Lents, Ltd. (incorporated by reference to exhibit 99.1 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 (Commission File No. 1-8518).


*		Incorporated by reference to Exhibits of like designation to Registrant’s Annual Report on Form 10-K for the period ended December 31, 1983 (Commission File No. 1-8518).

-4127-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LL&E ROYALTY TRUST

(Registrant)


	By:	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

Trustee


	By:	/s/ MIKE ULRICH

Mike Ulrich

Vice President and Trust Officer

Date: ~~August~~October 1920, 2011


NOTE:	Because the Registrant is a trust without officers or employees, only the signature of an officer of the Trustee is available and has been provided.

-4228-

INDEX TO EXHIBITS

Exhibit
Number				~~Description~~
	4*		—	Trust Agreement for LL&E Royalty Trust, dated as of June 1, 1983, between the Company and First City National Bank of Houston, as Trustee.
	28	.1*	—	Agreement of General Partnership of LL&E Royalty Partnership.
	28	.3*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Alabama) Property.
	28	.4*	—	Form of Conveyance of Overriding Royalty Interests for Jay Field (Florida) Property.
	28	.5*	—	Form of Conveyance of Overriding Royalty Interests for Offshore Louisiana Property.
	28	.6*	—	Form of Conveyance of Overriding Royalty Interests for South Pass 89 Property.
	28	.7*	—	Form of Royalty Deed.
	31		—	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32		—	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99	.1	—	Reserve Report as of September 30, 2009 dated May 24, 2011 prepared by Miller and Lents, Ltd. (incorporated by reference to exhibit 99.1 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission File No. 1-8518).
	99	.2	—	Reserve report as of September 30, 2010 dated March 28, 2011 prepared by Miller and Lents, Ltd. (incorporated by reference to exhibit 99.1 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 (Commission File No. 1-8518).


*		Incorporated by reference to Exhibits of like designation to Registrant’s Annual Report on Form 10-K for the period ended December 31, 1983 (Commission File No. 1-8518).

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TheTable actual net proceeds from the sales of oil and gas properties may vary substantially from these estimates in value due to changes in current and estimated future oil and gas prices, subsequent production, estimates of actual abandonment costs and other factors. Contents

Filing Compare · LL&E ROYALTY TRUST