Business Context and Reporting Period
Company: Marine Petroleum Trust (a Texas royalty trust)
Reporting Period: Quarterly period ended September 30, 2009
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, distributing all collected royalties to unitholders. The Trust also holds a 32.6% interest in Tidelands Royalty Trust "B".
Key Financial Metrics
| Metric | Q3 2009 | Q3 2008 |
|---|---|---|
| Total Income | $697,425 | $1,773,374 |
| Distributable Income | $629,184 | $1,650,319 |
| Distributable Income Per Unit | $0.31 | $0.83 |
| Distributions Per Unit | $0.25 | $0.77 |
| General & Administrative Expenses | $68,241 | $119,455 |
| Cash and Cash Equivalents | $1,176,029 | $1,038,850 (as of June 30, 2009) |
| Total Assets | $1,190,461 | $1,053,282 (as of June 30, 2009) |
| Units Outstanding | 2,000,000 | 2,000,000 |
Material Changes vs. Prior Period
- Revenue Decline: Distributable income decreased 61.9% year-over-year, driven by a 55.7% drop in average oil prices (from $134.69 to $59.65 per barrel) and a 68.4% drop in natural gas prices (from $13.18 to $4.17 per mcf).
- Production Decrease: Oil production fell 28.4% (4,995 bbls vs. 6,972 bbls) and natural gas production fell 12.2% (36,074 mcf vs. 41,078 mcf) compared to Q3 2008.
- Expense Reduction: General and administrative expenses decreased 42.9% to $68,241, primarily due to lower professional fees.
- Asset Growth: Total assets increased from $1,053,282 (June 30, 2009) to $1,190,461 (September 30, 2009), reflecting retained distributable income.
Outlook, Risks, and Commentary
- Production Outlook: Production from existing wells is anticipated to decrease due to normal depletion. The Trust has no control over drilling or re-working operations.
- Hurricane Impact: While significant leases disrupted by Hurricanes Gustav and Ike were back in production by Q3 2009, volumes may not fully recover to pre-hurricane levels. The impact on the December 2009 distribution remains uncertain.
- Liquidity: The Trust holds cash reserves for accrued liabilities and future expenses. Cash is held in deposits, U.S. Treasury bonds, and money market accounts, none of which are FDIC insured.
- Accounting Basis: Financial statements are prepared on a modified cash basis (royalty income recognized when received), not GAAP.
Investor Verification Checklist
- Verify the current status of oil and natural gas production volumes on the 58 leases held by the Trust.
- Confirm the extent of production recovery on leases previously impacted by Hurricanes Gustav and Ike.
- Review the financial health of the financial institutions holding the Trust's cash reserves, given the lack of FDIC insurance.
- Monitor the 32.6% equity interest in Tidelands Royalty Trust "B" for changes in its distributable income.
- Assess the impact of continued commodity price volatility on future quarterly distributions.