Business Context and Reporting Period
Company: Marine Petroleum Trust (a royalty trust with overriding royalty interests in Gulf of Mexico oil and gas leases).
Reporting Period: Quarterly period ended September 30, 1996 (Form 10-Q).
Outstanding Units: 2,000,000 units of beneficial interest.
Key Financial Metrics
| Metric | Q3 1996 | Q3 1995 |
|---|---|---|
| Total Income | $958,507 | $650,549 |
| Net Income | $927,649 | $629,913 |
| Net Income Per Unit | $0.46 | $0.31 |
| Distributions Per Unit | $0.50 | $0.27 |
| Net Cash from Operating Activities | $961,282 | $624,219 |
| Cash and Cash Equivalents (End of Period) | $2,009,430 | $1,716,609 |
| Total Current Liabilities | $908,959 | N/A |
Production Data (Q3 1996 vs Q3 1995):
- Oil: 23,102 barrels sold (up 27%); Average price $20.08/bbl (up from $16.31).
- Natural Gas: 208,969 mcf sold (down 1%); Average price $2.24/mcf (up from $1.57).
Material Changes
- Revenue Growth: Net income increased approximately 47% year-over-year, driven by a 27% increase in oil production volume and higher commodity prices for both oil and gas.
- Affiliate Performance: Equity in earnings from the Tidelands Royalty Trust B decreased by approximately 22% due to declining production volumes in that specific trust.
- Operational Activity: Since the last fiscal year-end (June 30, 1996), operators drilled 5 new development wells and re-entered/re-drilled 3 old wells, resulting in 8 new productive wells.
- Liquidity: Cash and cash equivalents decreased slightly by $11,265 during the quarter, primarily due to distributions to unitholders exceeding operating cash flow.
Outlook, Risks, and Contingencies
- Management Commentary: The Trust believes it will continue to have revenues sufficient to permit distributions for the foreseeable future, though no assurance is given regarding amounts.
- Key Risks:
- Fluctuations in oil and gas prices and demand.
- Depletion of existing wells or disruptions from storms, blowouts, or geological changes.
- Expiration or release of leases.
- Discontinuation of lease acquisition efforts by third parties regarding Tidelands interests.
- Contingencies: An accounts payable of $895,724 has been recorded to cover possible refunds required upon redetermination of gas prices for royalty payments in prior periods.
- Unusual Items: None reported in Part II of the filing.
Investor Verification Checklist
- Verify the sustainability of the 27% increase in oil production volume and the impact of current market prices on future distributions.
- Monitor the $895,724 contingent liability regarding potential gas price redeterminations and its effect on future cash flows.
- Assess the 22% decline in income from the Tidelands Royalty Trust B and its long-term impact on total trust revenue.
- Confirm the status of the 8 new wells drilled since June 1996 and their contribution to production volumes.
- Review the Trust's reliance on third-party operators for production, as the Trust itself does not operate trade or business activities.