Marine Petroleum Trust(US:MARPS)2021-09-24 19:16Revenue Sources and Dependence - For the fiscal year ended June 30, 2021, approximately 94% of Marine's royalty revenues were attributable to the sale of oil, while 6% were from natural gas[23]. - Arena Energy, LP accounted for 99% of Marine's royalty revenues in the fiscal year 2021, up from 92% in 2019[24]. - The Trust has no revenues from foreign sources and does not engage in any business activities beyond royalty collection[25]. - Marine's royalty revenues are highly dependent on oil and natural gas prices, with any sustained decline potentially affecting cash distributions to unitholders[31]. - Marine's income is highly dependent on oil and natural gas prices, which have historically experienced significant volatility[112]. Financial Performance - Marine's revenue from oil royalties in fiscal 2021 was $362,751, a decrease of approximately 48% from $691,915 in fiscal 2020[99]. - The average price realized for oil in fiscal 2021 was $39.93 per barrel, down from $54.79 per barrel in fiscal 2020[99]. - Marine's revenue from natural gas royalties in fiscal 2021 was $23,905, a decrease from $81,913 in fiscal 2020[100]. - The average price for natural gas increased to $2.80 per mcf in fiscal 2021 from $2.44 per mcf in fiscal 2020[100]. - Marine's distributable income for fiscal 2021 was $161,580, or $0.08 per unit, compared to $574,110, or $0.29 per unit, in fiscal 2020[93]. - Total income for the fiscal year 2021 was $386,817, down 50.9% from $788,185 in 2020[150]. - Distributable income fell to $161,580 in 2021, a decrease of 71.8% compared to $574,110 in 2020[150]. - Distributions per unit decreased from $0.30 in 2020 to $0.10 in 2021, reflecting a reduction of 66.7%[152]. Asset and Lease Information - Marine holds an overriding royalty interest equal to 0.75% of the value at the well of any oil, natural gas, or other minerals produced and sold from existing leases[19]. - The Trust's leases cover an aggregate of 199,868 gross acres, which will remain in force until they terminate or expire[22]. - As of June 30, 2021, Marine had an overriding royalty interest in 55 oil and natural gas leases covering a total of 199,868 gross acres[71]. - There were approximately 201 gross active wells subject to Marine's interests, although the exact classification of these wells is not determinable without unreasonable effort[70]. - Marine does not own or directly lease any physical properties, relying solely on overriding royalty payments from third-party oil and natural gas operations[64]. Risks and Limitations - The Trust's assets are depleting, and no funds are reinvested, which may lead to a reduction in future distributions[28]. - Marine is prohibited from acquiring new royalty interests, limiting its revenue potential to existing leases[36]. - The volatility of oil and gas prices reduces the predictability of future cash distributions to unitholders[35]. - Marine's royalty interest can be adversely affected by the abandonment of properties by working interest owners, which would terminate related royalty interests[44]. - Cash held by Marine for distributions is not insured by the Federal Deposit Insurance Corporation, posing a risk to unitholders in case of financial institution insolvency[58]. Taxation and Compliance - The Trust is exempt from the Texas franchise tax as a passive entity, but if this status changes, distributions may be reduced to cover tax liabilities[61]. - The Texas franchise tax is imposed at a rate of 0.75% on taxable entities' taxable margin apportioned to Texas[184]. - The no tax due threshold for the Texas franchise tax is $1,180,000 for reports due on or after January 1, 2021[187]. - The Trust anticipates qualifying as a passive entity for the tax year ending in 2021, which would exempt it from the Texas franchise tax[185]. - Each unitholder should consult their tax advisor regarding the implications of the Trust's revenue on their franchise tax computation[188]. Administrative and Operational Aspects - The Trust has no directors or officers, and therefore does not maintain a compensation committee or equity compensation plans[125]. - The Trust does not have any long-term contractual obligations other than the obligation to distribute income to unitholders[109]. - The Trustee evaluated the effectiveness of the Trust's disclosure controls and procedures, concluding they were effective as of June 30, 2021[118]. - No changes in internal control over financial reporting were reported during the fourth quarter of fiscal 2021[119]. - General and administrative expenses for fiscal 2021 increased to $225,237 from $214,075 in fiscal 2020[101].