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: Three months ended September 30, 1995.
Outstanding Units: 2,000,000 units of beneficial interest.
The Trust's sole purpose is to collect and distribute cash from royalties; it does not operate a trade or business. All royalties received, less administrative expenses, are distributed quarterly.
Key Financial Metrics
| Metric | Q3 1995 | Q3 1994 |
|---|---|---|
| Total Income | $650,549 | $621,006 |
| Net Income | $629,913 | $602,101 |
| Net Income Per Unit | $0.31 | $0.30 |
| Distributions Per Unit | $0.27 | $0.34 |
| Net Cash from Operations | $624,219 | $654,319 |
| Cash and Equivalents (End of Period) | $1,716,609 | $1,787,217 |
| Total Assets | $2,418,508 | N/A |
| Total Liabilities | $905,078 | N/A |
Revenue Composition: Approximately 47% from oil royalties and 53% from natural gas royalties.
Material Changes vs. Prior Period
- Net Income: Increased approximately 5% to $629,913 compared to $602,101 in the prior year quarter.
- Oil Production: Volume increased 38% (18,193 barrels vs. 13,187 barrels). Average price decreased $0.38 to $16.31 per barrel.
- Natural Gas Production: Volume increased 9% (210,632 mcf vs. 193,467 mcf). Average price decreased $0.13 to $1.57 per mcf. Higher volume offset the price decline.
- Affiliate Earnings: Equity in earnings of Tidelands Royalty Trust B decreased 38% to $91,322 (from $148,351), attributed to lower natural gas prices and shut-in production.
- Distributions: Distributions per unit decreased to $0.27 from $0.34 in the prior year.
Outlook, Risks, and Contingencies
Management Commentary: The Trust attributes increased oil production to higher prices and drilling/workover programs by working interest owners. Income from Tidelands is expected to fluctuate based on commodity prices and production levels.
Liquidity: The Trust maintains cash reserves to cover administrative expenses and distributions. There are no capital requirements as the Trust does not operate a business.
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.
Risks: Distributions are dependent on the volume and price of oil and gas sold by others and will fluctuate quarterly. The Trust has no control over production operations.
Investor Verification Checklist
- Verify the $895,724 liability for potential gas price redetermination refunds.
- Confirm the 38% decline in equity earnings from Tidelands Royalty Trust B and its impact on future distributions.
- Monitor the sustainability of the 38% increase in oil production volumes.
- Review the trend of declining commodity prices (oil and gas) and their offset by volume increases.
- Check the ratio of distributions to net income ($0.27 vs $0.31 per unit) to understand retained undistributed income.