Marine Petroleum Trust(MARPS) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents Marine Petroleum Trust's financial information, including statements and related disclosures Item 1. Financial Statements Presents Marine Petroleum Trust's unaudited condensed consolidated financial statements, including assets, liabilities, trust corpus, distributable income, and notes Condensed Consolidated Statements of Assets, Liabilities and Trust Corpus Presents the condensed consolidated statements of assets, liabilities, and trust corpus Condensed Consolidated Statements of Assets, Liabilities and Trust Corpus | Item | December 31, 2021 (Unaudited) ($) | June 30, 2021 ($) | | :-------------------------- | :------------------------------ | :-------------- | | Cash and cash equivalents | $944,570 | $902,023 | | Producing oil and natural gas properties | $7 | $7 | | Total assets | $944,577 | $902,030 | | Total current liabilities | $— | $— | | Trust corpus | $944,577 | $902,030 | Condensed Consolidated Statements of Distributable Income Presents the condensed consolidated statements of distributable income Condensed Consolidated Statements of Distributable Income (Three Months Ended December 31) | Item | 2021 (Unaudited) ($) | 2020 (Unaudited) ($) | | :---------------------------------- | :----------------- | :----------------- | | Oil and natural gas royalties | $264,692 | $101,545 | | Total income | $264,707 | $101,545 | | General and administrative expenses | $83,263 | $96,583 | | Distributable income | $181,444 | $4,962 | | Distributable income per unit | $0.09 | $0.00 | Condensed Consolidated Statements of Distributable Income (Six Months Ended December 31) | Item | 2021 (Unaudited) ($) | 2020 (Unaudited) ($) | | :---------------------------------- | :----------------- | :----------------- | | Oil and natural gas royalties | $493,932 | $155,185 | | Total income | $494,002 | $155,287 | | General and administrative expenses | $109,346 | $117,298 | | Distributable income | $384,656 | $37,989 | | Distributable income per unit | $0.19 | $0.02 | Condensed Consolidated Statements of Changes in the Trust Corpus (Six Months) Presents the condensed consolidated statements of changes in trust corpus for six months Condensed Consolidated Statements of Changes in Trust Corpus (Six Months Ended December 31) | Item | 2021 (Unaudited) ($) | 2020 (Unaudited) ($) | | :-------------------------- | :----------------- | :----------------- | | Trust corpus, beginning of period | $902,030 | $936,552 | | Distributable income | $384,656 | $37,989 | | Distributions to unitholders | $(342,109) | $(103,389) | | Trust corpus, end of period | $944,577 | $871,152 | | Distributions per unit | $0.17 | $0.05 | Condensed Consolidated Statements of Changes in Trust Corpus (Three Months) Presents the condensed consolidated statements of changes in trust corpus for three months Condensed Consolidated Statements of Changes in Trust Corpus (Three Months Ended December 31) | Item | 2021 (Unaudited) ($) | 2020 (Unaudited) ($) | | :-------------------------- | :----------------- | :----------------- | | Trust corpus, beginning of period | $976,619 | $880,546 | | Distributable income | $181,444 | $4,962 | | Distributions to unitholders | $(213,486) | $(14,356) | | Trust corpus, end of period | $944,577 | $871,152 | | Distributions per unit | $0.11 | $0.01 | Notes to Condensed Consolidated Financial Statements Provides explanatory notes to the condensed consolidated financial statements - The financial statements are condensed, consolidated, and unaudited, prepared on a modified cash basis, which differs from GAAP and includes Marine Petroleum Trust and its wholly-owned subsidiary, Marine Petroleum Corporation[26][27] - Distributable income is paid quarterly to unitholders, less reserves for accrued liabilities and estimated future expenses, with a $50,000 reserve deducted for the three months ended December 31, 2021[28] - Distributable income comprises royalties from offshore Texas leases, 98% of royalties from offshore Louisiana leases (via MPC), cash distributions from Tidelands Royalty Trust "B", and dividends from MPC, less administrative expenses[29] - Key differences from GAAP under the modified cash basis include royalty income recognition upon receipt, expense recording upon payment, and nominal asset valuation without depletion allowance[31] - The Trust owned 32.6% of Tidelands Royalty Trust "B" as of December 31, 2021, with Tidelands winding up and a final distribution of $0.205883 per unit expected on February 14, 2022[32][33] Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations The Trustee analyzes Marine Petroleum Trust's financial condition and operational results, covering organization, commodity prices, liquidity, leases, and comparative performance Organization Details the organization and purpose of Marine Petroleum Trust and its subsidiary - Marine Petroleum Trust is a Texas royalty trust established in 1956, administered by Simmons Bank as Trustee, with an agreement for Simmons Bank to resign and nominate Argent Trust Company as successor, pending unitholder approval[34] - The Trust's sole purpose is to administer and liquidate rights to payments from oil and natural gas leases in the Gulf of Mexico, holding interests offshore Texas, while its wholly-owned subsidiary, Marine Petroleum Corporation (MPC), holds interests offshore Louisiana[36][37] - Marine's rights are overriding royalty interests, terminating with the underlying lease, with income based on the selling price or wellhead value of produced minerals, and all production and marketing handled by working interest owners[38] Commodity Prices Discusses the impact of fluctuating commodity prices on the Trust's income and distributions - The Trust's income and monthly distributions are highly sensitive to fluctuating commodity prices, influenced by supply/demand, market uncertainty, and various external factors[41][46] - Gas royalty income generally relates to production three months prior, and crude oil royalty income to production two months prior, with declining prices reducing distributable income and potentially decreasing exploration/development activity[42] Liquidity and Capital Resources Outlines the Trust's liquidity position and capital resource management, noting no capital requirements - The Trust has no capital requirements, as its only obligation is to distribute collected distributable income to unitholders quarterly after administrative expenses[43] - The Trust is prohibited from engaging in trade or business, its oil and natural gas properties are depleting assets, and it is treated as a grantor trust for tax purposes, with income and deductions flowing through to unitholders[44] The Leases Describes Marine's overriding royalty interests in Gulf of Mexico oil and natural gas leases - No new well completions or drilling/recompletion activities were reported on Marine's interest leases during the three months ended December 31, 2021, or as of February 1, 2022[45] - Marine holds an overriding royalty interest equal to three-fourths of one percent of the working interest on 55 existing leases in the Gulf of Mexico, covering 199,868 gross acres, which does not apply to new leases[46][47] - The Trust's 32.6% interest in Tidelands Royalty Trust "B" will cease to provide income after a final distribution expected on February 14, 2022, as Tidelands' term expired in 2021 and it is winding up[47] Critical Accounting Policies and Estimates Explains Marine's critical accounting policies and estimates, primarily the modified cash basis method - Marine uses the modified cash basis method of accounting, recognizing royalty income when received and expenses when paid, reporting distributable income instead of net income, and permitting cash reserves for contingencies[48] - There were no changes in critical accounting policies or estimates during the three and six months ended December 31, 2021[49] New Accounting Pronouncements Addresses the impact of new accounting pronouncements on Marine's financial statements - No new accounting pronouncements have been adopted or issued that would significantly impact Marine's financial statements, given its modified-cash basis accounting[50] General Provides general information on Marine's royalty income sources and production expectations - Marine's royalty income is derived from third-party oil and natural gas production and fluctuates based on factors beyond its control, including productive wells, production levels, and commodity prices[51] - Royalty income depends on the operations of working interest owners responsible for production, sales, and royalty payment calculations, with production expected to decrease in the future due to normal well depletion[52][53] Summary of Operating Results Summarizes Marine Petroleum Trust's key operating results and performance metrics - For the six months ended December 31, 2021, 93% from oil and 7% from natural gas comprised royalty income, compared to 95% from oil and 5% from natural gas in the comparable 2020 period[54] Key Operating Results (Six Months Ended December 31) | Metric | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Distributable income per unit ($) | $0.19 | $0.02 | | Distributions per unit ($) | $0.17 | $0.05 | | Oil production (bbls) | 6,917 | 4,659 | | Natural gas production (mcf) | 6,775 | 4,118 | | Average oil price ($/bbl) | $66.06 | $31.70 | | Average natural gas price ($/mcf) | $5.46 | $1.82 | Net Production Quantities, Distributable Income, and Distributions Per Unit (Last Six Quarters) | Quarter Ended | Oil (bbls) | Natural Gas (mcf) | Distributable Income Per Unit ($) | Distributions Per Unit ($) | | :---------------- | :--------- | :---------------- | :---------------------------- | :--------------------- | | September 30, 2020 | 2,148 | 2,154 | $0.02 | $0.04 | | December 31, 2020 | 2,512 | 1,965 | $0.00 | $0.01 | | March 31, 2021 | 1,965 | 1,428 | $0.01 | $0.02 | | June 30, 2021 | 2,460 | 2,992 | $0.05 | $0.06 | | September 30, 2021 | 3,241 | 3,808 | $0.10 | $0.06 | | December 31, 2021 | 3,676 | 2,967 | $0.09 | $0.11 | Results of Operations (Three Months Ended December 31, 2021 vs. 2020) Compares Marine's operating results for the three months ended December 31, 2021, versus 2020 - Total oil and natural gas royalties increased significantly to $264,692 in Q4 2021 from $101,545 in Q4 2020, driven by higher production volumes and sharply increased commodity prices[60] - Distributable income surged to $181,444 in Q4 2021 from $4,962 in Q4 2020[61] Oil and Natural Gas Performance (Three Months Ended December 31) | Metric | 2021 | 2020 | Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | | Oil royalties ($) | $248,187 | $97,903 | +153.5% | | Oil volume sold (bbls) | 3,676 | 2,512 | +46.3% | | Average oil price ($/bbl) | $67.52 | $38.98 | +73.2% | | Natural gas royalties ($) | $16,505 | $3,642 | +353.2% | | Natural gas volume sold (mcf) | 2,967 | 1,965 | +50.9% | | Average natural gas price ($/mcf) | $5.56 | $1.85 | +200.5% | - General and administrative expenses decreased to $83,263 in Q4 2021 from $96,583 in Q4 2020, primarily due to lower professional and printing costs[66] Results of Operations (Six Months Ended December 31, 2021 vs. 2020) Compares Marine's operating results for the six months ended December 31, 2021, versus 2020 - Total oil and natural gas royalties increased significantly to $493,932 for the six months ended December 31, 2021, from $155,185 in the comparable 2020 period, driven by increased prices and production[67] - Distributable income rose substantially to $384,656 for the six months ended December 31, 2021, from $37,989 in the comparable 2020 period[68] Oil and Natural Gas Performance (Six Months Ended December 31) | Metric | 2021 | 2020 | Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | | Oil royalties ($) | $456,916 | $147,699 | +209.4% | | Oil volume sold (bbls) | 6,917 | 4,659 | +48.5% | | Average oil price ($/bbl) | $66.06 | $31.70 | +108.4% | | Natural gas royalties ($) | $37,016 | $7,487 | +394.4% | | Natural gas volume sold (mcf) | 6,775 | 4,118 | +64.5% | | Average natural gas price ($/mcf) | $5.46 | $1.82 | +200.0% | - General and administrative expenses decreased to $109,346 for the six months ended December 31, 2021, from $117,298 in the comparable 2020 period, mainly due to lower professional and printing costs[73] Forward-Looking Statements Highlights forward-looking statements and associated risks regarding future financial performance - The report contains forward-looking statements regarding future financial performance, which are subject to risks such as commodity price fluctuations, production declines, regulatory changes, economic conditions, and the Trustee's resignation[74] Website Provides information on where to access Marine Petroleum Trust's public filings - Marine's Annual, Quarterly, and Current Reports, along with amendments, are available free of charge on its website at **www.marps-marine.com**[75](index=75&type=chunk) Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk disclosures from the Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - No material change from the market risk disclosures in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021[76] Item 4. Controls and Procedures Details the effectiveness of disclosure controls and procedures, with the Trustee concluding they were effective and no material changes in internal control Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Presents the Trustee's conclusion on the effectiveness of disclosure controls and procedures - As of December 31, 2021, the Trustee concluded that Marine's disclosure controls and procedures were effective[79] Changes in Internal Control Over Financial Reporting Reports on any material changes in internal control over financial reporting - There have been no material changes in Marine's internal control over financial reporting during the quarter ended December 31, 2021[80] PART II. OTHER INFORMATION Presents other information, including risk factors and exhibits Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021[82] Item 6. Exhibits Lists exhibits in the Form 10-Q, including Corporate Trustee certifications under Sarbanes-Oxley Act Sections 302 and 906 - Exhibits include Certification of the Corporate Trustee pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[84]