Business Context and Reporting Period
Company: Marine Petroleum Trust (a Texas royalty trust)
Reporting Period: Quarterly period ended December 31, 2017 (Six months ended December 31, 2017)
Business Overview: The Trust holds overriding royalty interests in oil and natural gas leases offshore Texas and Louisiana. It is a passive entity prohibited from engaging in trade or business, with a term expiring June 1, 2021. The Trust uses the modified cash basis of accounting.
Outstanding Units: 2,000,000 units of beneficial interest.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2017 | Six Months Ended Dec 31, 2017 |
|---|---|---|
| Total Income | $174,590 | $384,096 |
| Distributable Income | $93,062 | $279,994 |
| Distributable Income Per Unit | $0.05 | $0.14 |
| Distributions Per Unit | $0.05 | $0.18 |
| General & Administrative Expenses | $81,528 | $104,102 |
| Cash and Cash Equivalents | $937,631 (as of Dec 31, 2017) | |
| Total Assets | $940,438 (as of Dec 31, 2017) | |
| Debt | None reported |
Material Changes vs. Prior Period
- Income Decline: Distributable income decreased to $93,062 for the three months ended Dec 31, 2017, from $134,790 in the prior year period. For the six-month period, it decreased to $279,994 from $306,169.
- Production Volume: Oil production decreased to 3,451 bbls (Q3) and 7,513 bbls (6-month) compared to 4,392 bbls and 8,333 bbls in the prior year periods, respectively. Natural gas production also declined significantly (4,486 mcf vs 8,769 mcf for Q3).
- Price Increases: Average realized oil prices increased to $46.11/bbl (Q3) and $47.18/bbl (6-month) from $44.21 and $44.27 in the prior year. Natural gas prices (net of expenses) increased to $3.00/mcf (Q3) and $2.61/mcf (6-month) from $1.99 and $1.75.
- Expense Increase: General and administrative expenses rose to $81,528 (Q3) and $104,102 (6-month) due to higher professional fees and printing/operation data expenses.
- Affiliate Income: Income from the Tidelands Royalty Trust "B" affiliate dropped to $0 for the current periods compared to $106 (Q3) and $174 (6-month) in the prior year.
Outlook, Risks, and Commentary
- Depletion: The Trust's assets are depleting and not being replaced due to prohibitions on new investments. Production is anticipated to decrease in the future due to normal well depletion.
- Market Risk: Income is highly dependent on third-party operators and fluctuates based on oil and natural gas prices and production volumes. No new well completions were recorded during the quarter.
- Trust Termination: The Trust is scheduled to expire on June 1, 2021, unless extended by a majority vote of unitholders.
- Accounting Basis: Financials are prepared on a modified cash basis, not GAAP. Royalty income is recognized when received, and expenses when paid.
- Forward-Looking Statements: The Trustee notes that actual results may differ due to price reductions, production disruptions, storm damage, or lease expirations.
Investor Verification Checklist
- Verify the Trust's expiration date of June 1, 2021, and the process for potential extension.
- Confirm the continued decline in production volumes (oil and gas) despite rising commodity prices.
- Review the lack of income from the Tidelands Royalty Trust "B" affiliate and its impact on future distributions.
- Monitor the Trust's cash balance ($937,631) relative to quarterly distribution obligations.
- Check for any updates on the status of the 55 leases covering 199,868 gross acres in the Gulf of Mexico.