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 report (Form 10-Q) for the period ended December 31, 1995.
Outstanding Units: 2,000,000 units of beneficial interest as of December 31, 1995.
Operational Model: The Trust collects royalties and distributes them quarterly to unitholders after deducting administrative expenses. It does not operate trade or business activities.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 1995 | Six Months Ended Dec 31, 1995 |
|---|---|---|
| Revenue (Total Income) | $660,204 | $1,310,753 |
| Net Income | $623,334 | $1,253,247 |
| Net Income Per Unit | $0.31 | $0.63 |
| Distributions Per Unit | $0.29 | $0.56 |
| Cash and Cash Equivalents | $1,719,141 (Balance Sheet) | $1,719,141 (Balance Sheet) |
| Net Cash from Operating Activities | N/A | $1,224,486 |
| Total Current Liabilities | $901,119 | $901,119 |
| Undistributed Income | $1,556,319 | $1,556,319 |
Production Data (Three Months Ended Dec 31, 1995):
- Oil: 18,193 barrels sold at an average price of $16.31/bbl.
- Natural Gas: 216,529 mcf sold at an average price of $1.71/mcf.
Material Changes vs. Prior Period
- Revenue Growth: Total income for the three months ended Dec 31, 1995, increased to $660,204 from $454,065 in the prior year period (approx. 45% increase).
- Net Income: Net income rose 48% to $623,334 for the quarter compared to $421,988 in the prior year.
- Volume Increases: Oil sales volume increased 29% and natural gas volume increased 27% compared to the prior year quarter.
- Price Increases: Average oil price rose to $16.31/bbl (from $14.92), and gas price rose to $1.71/mcf (from $1.32).
- Drilling Activity: Revenue from the Eugene Island Block 238 Field increased 226% due to new wells drilled by Chevron. Since June 30, 1995, operators commenced 10 new drilling operations (7 completed as oil/gas wells, 2 dry holes, 2 pending).
- Depletion: Three wells in the West Cameron Block 229 Field (operated by Seneca Resources) were depleted and production discontinued in October 1995.
Outlook, Risks, and Management Commentary
- Distribution Timing: Distributions lag production by one month for oil and two months for gas. The current quarter distribution reflects gas produced in September and oil in October. Benefits from price increases after September 1995 will be realized in the first quarter of 1996.
- Accounting Contingency: An accounts payable of $895,724 has been recorded to cover potential refunds required upon redetermination of gas prices for royalty payments in prior periods.
- Income Volatility: Distributions are dependent on the volume and price of oil and gas sold by third-party operators and will fluctuate quarterly.
- Equity Interest: Income from the equity interest in Tidelands Royalty Trust B increased 126% for the quarter but decreased 3% for the six-month period compared to the prior year.
Investor Verification Checklist
- Verify the status of the $895,724 accounts payable related to potential gas price redeterminations and refund requirements.
- Confirm the production schedules and completion status of the 2 pending drilling operations mentioned since June 1995.
- Monitor future quarterly distributions to assess the impact of the one-to-two-month lag between production and royalty receipt.
- Review the performance of the Eugene Island Block 238 Field to ensure sustained revenue growth following the 226% increase.
- Assess the impact of the depleted West Cameron Block 229 wells on future income from the Tidelands Royalty Trust B equity interest.