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 March 31, 1996.
Outstanding Units: 2,000,000 units of beneficial interest.
Key Financial Metrics
| Metric | Three Months Ended Mar 31, 1996 | Nine Months Ended Mar 31, 1996 |
|---|---|---|
| Total Income | $961,488 | $2,272,241 |
| Net Income | $924,907 | $2,178,154 |
| Net Income Per Unit | $0.46 | $1.09 |
| Distributions Per Unit | $0.31 | $0.87 |
| Cash and Equivalents (End of Period) | $1,847,776 | |
| Net Cash from Operating Activities (9 Months) | $1,985,697 | |
| Total Current Liabilities | $903,794 |
Material Changes vs. Prior Period
- Revenue Growth: Net income increased 65% for the quarter and 37% for the nine-month period compared to the same periods in 1995.
- Oil Production: Oil volumes sold increased 28% (quarter) and 19% (nine months). Average oil prices rose to $17.03/bbl (quarter) and $16.51/bbl (nine months).
- Gas Production: Natural gas volumes decreased 2% in the quarter but increased 10% over the nine months. Average gas prices increased significantly to $2.85/mcf (quarter) and $2.04/mcf (nine months).
- Drilling Activity: Since June 30, 1995, operators drilled 5 new wells and re-entered 17 old wells. Of the 22 wells, 18 were completed as productive oil or gas wells, while 4 were abandoned as dry holes.
Outlook, Risks, and Management Commentary
Management Commentary: The Trust expects to continue having revenues sufficient to permit distributions to unitholders for the foreseeable future. Income is derived from unrelated parties' production activities and fluctuates based on production levels and commodity prices.
Risks and Contingencies:
- Market Volatility: Distributions depend on oil and gas prices and production volumes, which are beyond the Trust's control.
- Operational Risks: Potential for reduced production due to well depletion, storm damage, blowouts, or geological changes.
- Lease Expiration: Risk of expiration or release of leases subject to the Trust's interests.
- Accounting Contingency: An accounts payable of $895,724 is held to cover possible refunds regarding prior period gas price redeterminations.
Investor Verification Checklist
- Verify the sustainability of current oil and gas price levels ($17.03/bbl and $2.85/mcf) against market forecasts.
- Confirm the status of the 18 productive wells completed since June 1995 and their expected production lifecycles.
- Review the specific terms regarding the $895,724 accounts payable reserve for potential royalty refunds.
- Monitor the production trends of the Tidelands Royalty Trust B equity interest, which contributes approximately 13% of the Trust's income.