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 30, 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.)

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 ü No

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.


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 November 9, 2011, 18,991,304 Units of Beneficial Interest in the registrant were outstanding.

TABLE OF CONTENTS


	Page

Special Note		2
Part I. Financial Information		3
Item 1. Financial Statements:		3
Presentation of Financial Information		3
Statements of Cash Earnings and Distributions		4
Statements of Assets, Liabilities and Trust Corpus		4
Statements of Changes in Trust Corpus		4
Notes to Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures about Market Risk		27
Item 4. Controls and Procedures		27
Part II. Other Information		29
Item 1A. Risk Factors		29
Item 6. Exhibits		29
Signature		30
EX-31
EX-32

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Special Note

LL&E Royalty Trust (the “Trust”) filed its 2009 and 2010 quarterly and annual reports on August 19, 2011. The Trust concurrently filed its quarterly reports on Form 10-Q for the first and second quarters of 2011 on October 20, 2011. The Trust is now filing its quarterly report on Form 10-Q for the third quarter of 2011. The Trust was unable to prepare its financial statements for these filings until it completed the 2009 and 2010 filings. Please see the Trust’s annual report on Form 10-K for the year ended December 31, 2010 for additional information.

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PART I


Item 1.	*Financial Statements.*

LL&E ROYALTY TRUST

Presentation of Financial Information

The accompanying unaudited financial statements of LL&E Royalty Trust (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, 2010. The cash earnings and distributions for the three months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011.

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LL&E ROYALTY TRUST

Statements of Cash Earnings and Distributions

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010

Royalty revenues	$	—		$	50		$	—		$	233,974
Trust administrative expenses		(720,495	)		(236,276	)		(1,788,546	)		(675,492	)

Cash losses		(720,495	)		(236,226	)		(1,788,546	)		(441,518	)
Changes in undistributed cash		720,495			236,226			1,788,546			441,518

Cash distributions	$	—		$	—		$	—		$	—

Cash distributions per Unit	$	—		$	—		$	—		$	—

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,
	2011			2010

ASSETS
Cash	$	10,968		$	564,477
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	)

Total assets	$	10,968		$	564,477


LIABILITIES AND TRUST CORPUS
Advances payable	$	2,379,347		$	1,144,310
Trust Corpus (18,991,304 Units of Beneficial Interest authorized, issued and outstanding)		(2,368,379	)		(579,833	)

Contingencies (note 7)
Total liabilities and trust corpus	$	10,968		$	564,477

Statements of Changes in Trust Corpus

(Unaudited)


	Nine Months Ended
	September 30,
	2011			2010

Trust Corpus, beginning of period	$	(579,833	)	$	3,741
Cash losses		(1,788,546	)		(441,518	)
Cash distributions		—			—
Amortization of royalty interest		—			—

Trust Corpus, end of period	$	(2,368,379	)	$	(437,777	)

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

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

September 30, 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, 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 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 are traded over the counter under the symbol LRTR.

The accompanying financial statements should be read in conjunction with the Trust’s Annual 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

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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.

As a result of the Beckett lawsuit, certain of the bidders who had submitted preliminary indications of interest in purchasing the Trust’s remaining assets 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 in the Trust’s public filings, the Trustee suspended the sale process pending a 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 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.

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 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

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

to appoint Premier was mailed by August 1, 2011 and the meeting to appoint Premier occurred by September 1, 2011. However, Premier refused to accept its appointment, and Mr. Beckett has asserted that the settlement agreement did not require him to dismiss his 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 September 30, 2011, the Trust had $10,968 in cash (all of which had been advanced to the Trust by Bank of New York (BNY) Mellon, as described below) and was holding unpaid invoices for administrative services totaling approximately $436,399. In addition, BNY Mellon, an affiliate of the Trustee, has made interest-free advances to enable the Trust to pay administrative expenses. As of September 30, 2011, the total amount advanced to the Trust (the “Bank Advance”) by BNY Mellon was $2,379,347. 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.

As of November 10, 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 November 10, 2011, the total amount advanced to the Trust (the “Bank Advance”) by the Bank was $2,582,294, of which $8,769 remained available to pay expenses at November 10, 2011. However, at November 10, 2011, in addition to the amount owed to the Bank, the Trust was also holding unpaid invoices for administrative services totaling $619,153. 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 distribution can be made to Unit holders.

For the first nine months of 2011, the Trust did not receive any royalty revenue. Excess production costs must be recovered by the Working Interest Owners before any distribution of royalty revenues will be made to the Trust. During the first nine months of 2010, the Trust did not receive any royalty revenue except for $50 of royalty revenue from the Fee Lands property.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)


(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 30, 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 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.

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-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.


(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 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

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

effective December 31, 2007. Accordingly, there exists substantial doubt about the Trust’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments as a result of the termination of the Trust.

As of September 30, 2011, the Trust had $10,968 in cash (all of which had been advanced to the Trust by BNY Mellon, as described below) and was holding unpaid invoices for administrative services totaling approximately $436,399. In addition, BNY Mellon, an affiliate of the Trustee, has made interest-free advances to enable the Trust to pay administrative expenses. As of September 30, 2011, the total amount advanced to the Trust (the “Bank Advance”) by BNY Mellon was $2,379,347. 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.


(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

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

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 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 required to recognize IDC Recapture Income on the disposition of the Royalties. The opinion of the Tax Court has become final and nonappealable.

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.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)


(6)	Dismantlement Costs

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 nine months of 2011, the Working Interest Owner withheld $7,825,854, $2,010,773 and $1,757,795 in escrow from the Jay Field, Offshore Louisiana and South Pass 89 Properties, respectively. The Working Interest Owner expended $3,097,705 and $16,770 from the escrow funds for dismantlement costs incurred during the first nine months of 2011 for the Offshore Louisiana and South Pass 89 properties, respectively.

The cumulative escrow balance as of September 30, 2011 was $12,369,257 for the Jay Field property and $11,332,299 for the South Pass 89 property, 50 percent 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 September 30, 2011 for the Offshore Louisiana property was $9,676,777, 90 percent 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 conveyance. 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.

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.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

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

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. 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, 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 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 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 with the terms of the 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 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.

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LL&E ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS — (Continued)

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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 30, 2011.

Note Regarding Forward-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, 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 30, 2011 is not necessarily indicative of the fair market value of the interests held by the Trust.

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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.

-15-

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 Mr. Barlett as successor trustee. In connection with the calling of the second meeting, Mr. Beckett dismissed his lawsuit with prejudice

As of September 30, 2011, the Trust had $10,968 in cash, unpaid invoices for administrative services totaling approximately $436,399, and owed $2,379,347 to BNY Mellon for the Bank Advance.

As of November 10, 2011, the Trust had no cash except for the cash advanced to the Trust by BNY Mellon, an affiliate of the Trustee, as an interest-free advance to enable the Trust to pay administrative expenses. As of November 10, 2011, the total amount advanced to the Trust (the “Bank Advance”) by the Bank was $2,582,294, of which $8,769 remained available to pay expenses at November 10, 2011. However, at November 10, 2011, in addition to the amount owed to the Bank, the Trust was also holding unpaid invoices for administrative services totaling $619,153.

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 the first nine months of 2011, the Trust received no royalty income. The Jay Field, South Pass 89 and Offshore Louisiana properties excess production costs as of September 30, 2011 were approximately $13,916,670, $1,480,542 and $3,260,791 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.

For the first nine months of 2010, the Trust did not receive any royalty revenue associated with the South Pass or Offshore Louisiana properties. During the first nine months of 2010, the Trust received a royalty income of $10,064.

-16-

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.

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. There has been no material change in the status of the information provided to the Trustee by the Working Interest owners and set forth in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 regarding the hurricane damages.

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.

The cumulative Offshore Louisiana escrow balance (which is held by the Working Interest Owner and is not segregated) as of September 30, 2011 was $9,676,777. 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 “escrow” would be distributable to the Trust. However, the estimated Offshore Louisiana dismantlement costs exceed the escrowed amounts substantially, and no such distributions are likely.

-17-

The cumulative escrow balance (which is held by the Working Interest Owner and is not segregated) as of September 30, 2011 was $12,369,257 for the Jay Field property. The Jay Field Working Interest Owner expects to utilize all such amount in payment of a portion of the Trust’s share of Jay Field dismantlement costs. Under the conveyances, the Jay Field Working Interest Owner was and remains entitled to escrow or otherwise set aside substantially more than it has for Jay 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 Jay Field 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 Field dismantlement costs exceed the 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 30, 2011 was $11,332,299 for the South Pass 89 property. The South Pass 89 Working Interest Owner expects to utilize all such amount in payment of a portion of the Trust’s share of South Pass 89 dismantlement costs. Under the conveyances, the South Pass 89 Working Interest Owner was and remains entitled to escrow or otherwise set aside substantially more than it has for 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 amounts. Assuming that the South Pass 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 South Pass 89 dismantlement costs exceed the escrowed amounts substantially, and no such distributions are likely.

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 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 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. 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 June 2011 and Trust accounting month September 2011 indicates that 125% of Quantum’s current estimate of these costs is approximately $25,000,000 and that the amount withheld in escrow is approximately $12,000,000.

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.

-18-

Results of Operations


	Third Quarter						First Nine Month
	2011			2010			2011			2010

Royalty revenues	$	—		$	50		$	—		$	233,974
Trust administrative expenses		(720,495	)		(236,276	)		(1,788,546	)		(675,492	)

Cash losses	$	(720,495	)	$	(236,226	)	$	(1,788,546	)	$	(441,518	)
Change in undistributed cash		720,495			236,226			1,788,546			441,518

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, 2011 and 2010 (the 2011 and 2010 “Third Quarters” and “First Nine Months”, respectively) are attributable to the Working Interest Owner’s operations during the periods April through June (the “Three-Month Operating Periods”) of 2011 and 2010, respectively, and the periods October 2010 through June 2011 and October 2009 through June 2010 (the 2011 and 2010 “Nine-Month Operating Periods”, respectively).

There were no distributions made to the Unit holders for the 2011 Third Quarter or the 2010 Third Quarter. For the third quarter of 2011, the Trust had $720,525 in G&A expenses, primarily related to cash payments made for legal and accounting services. G&A expenses are paid based on the trustee’s discretion or the available cash amounts. As of September 30, 2011, the Trust had only $10,968 in cash, and had substantial unpaid administrative expenses. During the Third Quarter 2011 and 2010, the Trust received cash of $0 and $50, respectively, from the Working Interest Owner with respect to the Royalties from the Properties.

There were no Distributions to the Unit holders for the First Nine Months of 2011 or the First Nine Months of 2010. During the First Nine Months of 2011 and 2010, the Trust received cash of $0 and $233,974, respectively, from the Working Interest Owner with respect to the Royalties from the Properties.

-19-

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

Third Quarter 2011


				South			Offshore
	Jay Field			Pass 89			Louisiana			Total

Revenues:
Liquids	$	9,073,692		$	417,427		$	702,324		$	10,193,443
Sulfur		217,943			—			—			217,943
Natural gas		—			—			47,570			47,570

		9,291,636			417,427			749,894			10,458,956
Amounts withheld in escrow(3)		(3,434,990	)		(417,427	)		(749,894	)		(4,602,310	)
Production costs and expenses(1)		(5,045,468	)		(72,358	)		(412,126	)		(5,529,952	)
Capital expenditures		(937,372	)		—			—			(937,372	)

Net Proceeds	$	(126,193	)	$	(72,358	)	$	(412,126	)	$	(610,678	)

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

Other Proceeds Paid to the Trust											—
Fee Lands Royalties											—

Royalties paid to the Trust										$	—

-20-

First Nine Months 2011


				South			Offshore
	Jay Field			Pass 89			Louisiana			Total

Revenues:
Liquids	$	23,497,584		$	1,757,795		$	1,829,975		$	27,085,354
Sulfur		500,933			—			—			500,933
Natural gas		—			—			180,798			180,798

		23,998,517			1,757,795			2,010,773			27,767,085
Amounts withheld in escrow(3)		(7,825,854	)		(1,757,795	)		(2,010,773	)		(11,594,422	)
Production costs and expenses(1)		(12,252,962	)		(612,162	)		(1,089,492	)		(13,954,616	)
Capital expenditures		(4,213,436	)		—			—			(4,213,436	)

Net Proceeds	$	(293,736	)	$	(612,162	)	$	(1,089,492	)	$	(1,995,390	)

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

Other Proceeds Paid to the Trust											—
Fee Lands Royalties											—

Royalties paid to the Trust										$	—


(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 Third Quarter and 2011 First Nine Months was $199,461 and $516,288, 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.

Processing fees earned on the South Pass 89 properties are shown as a reduction of production costs and expenses. For the 2011 Third Quarter production costs and expenses include processing fee income of $83,572 For the 2011 First Nine Months, South Pass 89 processing fees earned were $353,797.


(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in 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.

-21-

Third Quarter 2010


				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
Natural gas		—			—			128,750			128,750
Other		—			—			45,000			45,000

		4,648,510			533,021			691,578			5,873,109
Amounts withheld in escrow(3)		—			(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)	$	—		$	—		$	—		$	—

Other Proceeds Paid to the Trust											—
Fee Lands Royalties											50

Royalties paid to the Trust										$	50

-22-

First Nine Months 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(3)		—			(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)	$	—		$	—		$	—		$	—

Other Proceeds Paid to the Trust											223,910
Fee Lands Royalties											10,064

Royalties paid to the Trust										$	233,974


(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.

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 2010 First Nine Months, South Pass 89 processing fees earned were $231,048.


(2)		As a result of excess production costs incurred in one monthly operating period and then recovered in 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.

-23-

The following unaudited schedule provides a summary of the Working Interest Owner’s calculation of the Net Proceeds from the Properties and the Royalties paid to the Trust for the Third Quarter and First Nine Months of 2011 and 2010:


	Third Quarter						First Nine Months
	2011			2010			2011			2010

Net Proceeds:
Revenues	$	10,458,956		$	5,873,109		$	27,767,085		$	13,580,746
Amounts withheld in escrow		(4,602,310	)		(1,224,599	)		(11,594,422	)		(4,680,590	)
Production costs and expenses		(5,529,952	)		(3,245,865	)		(13,954,616	)		(6,922,043	)
Insurance recovery proceeds		0			1,480,951			0			1,480,951
Capital expenditures		(937,372	)		(1,037,582	)		(4,213,436	)		(2,140,308	)

Net Proceeds	$	(610,678	)	$	1,846,014		$	(1,995,390	)	$	1,318,756

Royalties paid to the Trust:
Other proceeds paid to the Trust	$	—		$	—		$	—		$	223,910
Overriding Royalties		—			—			—			—
Fee Lands Royalties		—			50			—			10,064

Royalties paid to the Trust	$	—		$	50		$	—		$	233,974

With respect to the Productive Properties in the current operating period, revenues of the Working Interest Owner increased 78% in the 2011 Three-Month Operating Period versus the comparable period in 2010 primarily due to a large increase in sales price. In the 2011 Three-month Operating Period, average crude oil, natural gas liquids, natural gas, and sulfur prices were $106.91 per barrel, $62.15 per barrel $4.59 per Mcf and $208.4 per long ton, respectively. In the comparable 2010 Three-Month Operating Period, average crude oil, natural gas liquids, natural gas, and sulfur prices were $75.09 per barrel, $43.28 per barrel, $4.39 per Mcf and $85.83 per long ton, respectively. The revenues paid to the Trust decreased to zero in the 2011 Nine-Month Operating Period versus the comparable period in 2010 since no proceeds remained net of special cost escrow and excess production costs. The revenues of Working Interest Owner increased greater than 100% in the 2011 Nine-Month Operating Period versus the comparable period in 2010 primarily due to a large increase in sales price, as well as re-starting production at Jay Field property effective March 2010. In the 2011 Nine-Month Operating Period, average crude oil, natural gas liquids, natural gas and sulfur prices were $94.94 per barrel, $57.78 per barrel, $4.39 per Mcf and $173.98 per long ton, respectively. In the comparable 2010 Nine-Month Operating Period, average crude oil, natural gas liquids, natural gas, and sulfur prices were $75.04 per barrel, $43.74 per barrel, $5.84 per Mcf and $92.69 per long ton, 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 the 2011 and 2010 Nine-Month Operating Period. There was no imputed natural gas production for the 2011 and 2010 Nine-Month Operating Period.

-24-

In the first nine months of 2011 and 2010, the Working Interest Owners reserved $11,594,422 and $4,680,590, respectively, in escrow.

Production costs and expenses incurred by the Working Interest Owner on the Productive Properties increased 70% in the 2011 three-month period and greater than 100% in the 2011 Nine-Month and 2011 Nine-Month Operating Period versus the comparable periods in 2010. The increase in the Three-Month and Nine-Month Operating Period is primarily due to the fact that 2011 contained a full period of operations while 2010 contained limited activity as production was temporarily suspended through February 2010. Limited production was restarted in March 2010 for the remainder of the nine month period through September 2010 at the Jay Field property.

Capital expenditures decreased 10% in the 2011 Three-Month Operating Period and increased 97% as well for the 2011 Nine-Month Operating Period versus the comparable periods in 2010. The increase in the Nine Month Operating Period in capital expenditures is primarily due to the design and installation of a new system at the Jay Field property in preparation to restart the NGL production the coming quarter that was previously suspended. This also caused the decrease in the 2011 three month period as fewer capital expenditures were required given the previous large amounts expensed.

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.

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 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.

-25-

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 information regarding the assets of the Trust:

ASSETS


Cash at September 30, 2011	$	10,968
Net Revenues Discounted at 10% per year per reserve report as of September 30, 2010		4,848,000

Estimates of the proved oil and gas reserves and estimates of the future net revenues from the proved oil and gas reserves attributable to the Properties as of September 30, 2010 have been made by Miller and Lents, Ltd. (“Miller and Lents”). Based on such estimates, Miller and Lents has also calculated the present value of the estimated future net revenues to the Trust and the imputed reserves attributable to the Trust as of September 30, 2010. A copy of the Miller and Lents letter, dated June 8, 2011, setting forth such estimates, is filed as exhibit 99.2 to the Trust’s Form 10-K for the year end December 31, 2010.

Management is unable to estimate the fair value of the properties at this time due to the uncertain nature of the industry and the complex nature of the calculation. In lieu of such calculation, the Net Revenues as estimated in the reserve report have been used to estimate the assets of the Trust. In addition, the 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.

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.

-26-


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 Interest 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;

	•	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

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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 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Trustee’s internal control over financial reporting.

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PART II

OTHER INFORMATION


Item 1A.	*Risk Factors*

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, 2010.


Item 6.	*Exhibits*


(a)	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


*		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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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: November 10, 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.

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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


*		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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LL&E ROYALTY TRUST 10-Q