Marine Petroleum Trust(MARPS) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the Trust's unaudited condensed consolidated financial statements, including assets, liabilities, distributable income, and changes in trust corpus, along with the Trustee's discussion and analysis of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Marine Petroleum Trust, including statements of assets, liabilities and trust corpus, distributable income, and changes in trust corpus for the periods ended March 31, 2022, and June 30, 2021. It also includes notes detailing accounting policies, basis of accounting (modified cash basis, not GAAP), distributable income components, and the Trust's investment in Tidelands Royalty Trust "B" Condensed Consolidated Statements of Assets, Liabilities and Trust Corpus This section provides a snapshot of the Trust's financial position, detailing assets, liabilities, and trust corpus as of March 31, 2022, and June 30, 2021 | Metric | March 31, 2022 (Unaudited) | June 30, 2021 | | :-------------------------- | :-------------------------- | :------------ | | Cash and cash equivalents | $1,115,737 | $902,023 | | Total assets | $1,115,744 | $902,030 | | Trust corpus | $1,115,744 | $902,030 | Condensed Consolidated Statements of Distributable Income This section outlines the Trust's distributable income for the three and nine months ended March 31, 2022, and 2021, highlighting royalty income and expenses | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Nine Months Ended March 31, 2022 | Nine Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Oil and natural gas royalties | $371,382 | $82,501 | $865,314 | $237,686 | | Oil and natural gas royalties from affiliate | $93,134 | — | $93,134 | — | | Total income | $464,333 | $82,853 | $958,335 | $237,869 | | General and administrative expenses | $78,196 | $71,343 | $187,542 | $188,640 | | Distributable income | $386,137 | $11,241 | $770,793 | $49,229 | | Distributable income per unit | $0.19 | $0.01 | $0.39 | $0.02 | Condensed Consolidated Statements of Changes in Trust Corpus (Nine Months) This section details the changes in the Trust's corpus over the nine months ended March 31, 2022, and 2021, including distributable income and unitholder distributions | Metric | Nine Months Ended March 31, 2022 | Nine Months Ended March 31, 2021 | | :-------------------------- | :------------------------------- | :------------------------------- | | Trust corpus, beginning | $902,030 | $936,552 | | Distributable income | $770,793 | $49,229 | | Distributions to unitholders | ($557,079) | ($139,647) | | Trust corpus, end of period | $1,115,744 | $846,134 | | Distributions per unit | $0.28 | $0.07 | Condensed Consolidated Statements of Changes in Trust Corpus (Three Months) This section details the changes in the Trust's corpus over the three months ended March 31, 2022, and 2021, including distributable income and unitholder distributions | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Trust corpus, beginning | $944,577 | $871,152 | | Distributable income | $386,137 | $11,241 | | Distributions to unitholders | ($214,970) | ($36,259) | | Trust corpus, end of period | $1,115,744 | $846,134 | | Distributions per unit | $0.11 | $0.02 | Notes to Condensed Consolidated Financial Statements This section provides critical details on the Trust's accounting policies, basis of accounting, components of distributable income, and its investment in Tidelands Royalty Trust "B" - The financial statements are prepared on a modified cash basis method, not in conformity with GAAP, as permitted for royalty trusts by SEC Staff Accounting Bulletin Topic 12:E[22] - Distributable income is paid quarterly and fluctuates primarily due to changes in oil and natural gas prices and production quantities, and includes 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[23][24] - The Trust owned 32.6% of Tidelands Royalty Trust "B" at March 31, 2022. Tidelands was wound up, and a final distribution of $93,134 was received in February 2022[26][28] Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the Trust's organization, its financial condition, and results of operations, highlighting the impact of commodity prices, liquidity, and accounting policies. It details the significant increase in distributable income and distributions per unit for both the three and nine months ended March 31, 2022, driven by higher oil and natural gas production volumes and prices, as well as a final distribution from Tidelands Royalty Trust "B" Organization This section describes Marine Petroleum Trust's structure, purpose, and its role as a royalty trust administering oil and natural gas lease payments - Marine Petroleum Trust is a royalty trust created in 1956, with Simmons Bank serving as the corporate trustee; a proposed change to Argent Trust Company was not approved by unitholders[29] - The Trust's sole purpose is the administration and liquidation of 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[30][31] - The Trust holds overriding royalty interests, which are passive and terminate with the underlying lease, with income based on the selling price or wellhead value of produced minerals[32] Commodity Prices This section discusses how fluctuating commodity prices for oil and natural gas significantly impact the Trust's income and distributions - The Trust's income and monthly distributions are heavily influenced by fluctuating commodity prices, which are affected by supply/demand, market uncertainty, and various external factors including political and economic conditions, and governmental regulation[35][40] - Declining crude oil and natural gas prices reduce distributable income and may lead to decreased exploration and development activity on the Trust's royalty properties[36] Liquidity and Capital Resources This section clarifies that the Trust has no capital requirements, as its sole function is to distribute collected income from depleting royalty assets - The Trust has no capital requirements, as its only obligation is to distribute collected distributable income to unitholders quarterly after administrative expenses[37] - The Trust's oil and natural gas properties are depleting assets, and the Trust is prohibited from making new investments, allowing it to be treated as a grantor trust for tax purposes[38] The Leases This section provides an overview of the Trust's overriding royalty interests in Gulf of Mexico leases and reports on recent drilling activities - No new well completions or drilling/recompletion activities were reported on Marine's interest leases during the three months ended March 31, 2022, or as of May 1, 2022[39] - Marine holds an overriding royalty interest equal to three-fourths of one percent of the working interest on 55 leases covering 199,868 gross acres in the Gulf of Mexico, applicable only to existing leases[40] Critical Accounting Policies and Estimates This section explains Marine's modified cash basis accounting method and confirms no changes in critical accounting policies or estimates - Marine uses the modified cash basis method of accounting, recording royalty income when received and distributions when declared, with expenses recorded on an actual paid basis, and cash reserves may be established for contingencies[41] - There were no changes in critical accounting policies or estimates during the three and nine months ended March 31, 2022[42] New Accounting Pronouncements This section confirms that no new accounting pronouncements have a significant impact on Marine's financial statements due to its modified-cash basis accounting - No new accounting pronouncements have been adopted or issued that would significantly impact Marine's financial statements due to its modified-cash basis accounting[43] General This section highlights that Marine's royalty income is subject to external factors like production levels and commodity prices, with expected declines due to normal depletion - 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[44] - Production from existing wells is expected to decrease due to normal depletion, and operators do not provide information on future drilling or re-working operations[46] Summary of Operating Results This section summarizes the Trust's operating performance, including distributable income, distributions per unit, and key production and pricing metrics - For the nine months ended March 31, 2022, royalty income was primarily from oil (93%) with natural gas contributing 7%, compared to 95% oil and 5% natural gas in the prior year[47] | Metric | 9 Months Ended March 31, 2022 | 9 Months Ended March 31, 2021 | | :-------------------------- | :---------------------------- | :---------------------------- | | Distributable income per unit | $0.39 | $0.02 | | Distributions per unit | $0.28 | $0.07 | | Metric | 9 Months Ended March 31, 2022 | 9 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Oil production (bbls) | 11,635 | 6,624 | | Natural gas production (mcf) | 10,457 | 5,546 | | Average oil price per bbl | $69.30 | $34.14 | | Average natural gas price per mcf | $5.65 | $2.08 | | Quarter Ended | Oil (bbls) | Natural Gas (mcf) | Distributable Income Per Unit | Distributions Per Unit | | :----------------- | :--------- | :---------------- | :---------------------------- | :--------------------- | | 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 | | March 31, 2022 | 4,718 | 3,681 | $0.19 | $0.11 | Results of Operations—Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021 This section analyzes the Trust's financial performance for the three months ended March 31, 2022, compared to the prior year, focusing on royalty income and expenses - Income from oil and natural gas royalties increased significantly to $371,382 for the three months ended March 31, 2022, from $82,501 in the comparable period of 2021, driven by increased production and sharply higher prices[53] | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Distributable income | $386,138 | $11,241 | | Oil royalties income | $349,357 | $78,468 | | Oil volume sold (bbls) | 4,718 | 1,965 | | Average oil price per bbl | $74.05 | $39.94 | | Natural gas royalties income | $22,025 | $4,033 | | Natural gas volume sold (mcf) | 3,681 | 1,428 | | Average natural gas price per mcf | $5.98 | $2.82 | | Tidelands distribution | $93,134 | — | | General and administrative expenses | $78,196 | $71,343 | Results of Operations—Nine Months Ended March 31, 2022 Compared to the Nine Months Ended March 31, 2021 This section analyzes the Trust's financial performance for the nine months ended March 31, 2022, compared to the prior year, focusing on royalty income and expenses - Income from oil and natural gas royalties (excluding Tidelands) increased to $865,314 for the nine months ended March 31, 2022, from $237,686 in the comparable period of 2021, primarily due to higher prices and production[60] | Metric | 9 Months Ended March 31, 2022 | 9 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Distributable income | $770,793 | $49,229 | | Oil royalties income | $806,273 | $226,167 | | Oil volume sold (bbls) | 11,635 | 6,624 | | Average oil price per bbl | $69.30 | $34.14 | | Natural gas royalties income | $59,041 | $11,519 | | Natural gas volume sold (mcf) | 10,457 | 5,546 | | Average natural gas price per mcf | $5.65 | $2.08 | | Tidelands distribution | $93,134 | — | | General and administrative expenses | $187,541 | $188,641 | Forward-Looking Statements This section identifies forward-looking statements and outlines the inherent risks associated with commodity prices, production, and regulatory changes - Forward-looking statements are identified by words like "anticipate," "believe," "expect," and are subject to risks such as reductions in commodity prices or demand, production declines, regulatory changes, and general economic conditions[66] Website This section informs that Marine's SEC reports are available free of charge on its website after filing - Marine makes its SEC reports (10-K, 10-Q, 8-K) available free of charge on its website, www.marps-marine.com, as soon as practicable after filing[67] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the market risk disclosures previously provided in Marine's Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - No material changes from the market risk information provided in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021[68] Item 4. Controls and Procedures This section confirms the effectiveness of Marine's disclosure controls and procedures as of March 31, 2022, and reports no material changes in internal control over financial reporting during the quarter Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures This section confirms the Trustee's conclusion that Marine's disclosure controls and procedures were effective as of March 31, 2022 - The Trustee concluded that Marine's disclosure controls and procedures were effective as of March 31, 2022, following an evaluation of their design and operation[70][71] Changes in Internal Control Over Financial Reporting This section reports that there were no material changes in Marine's internal control over financial reporting during the quarter ended March 31, 2022 - There have been no material changes in Marine's internal control over financial reporting during the quarter ended March 31, 2022[72] PART II. OTHER INFORMATION This part addresses market risk, controls and procedures, and lists required exhibits, confirming no material changes to previously disclosed risk factors Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in Marine's Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - No material changes from the risk factors previously disclosed in Marine's Annual Report on Form 10-K for the fiscal year ended June 30, 2021[74] Item 6. Exhibits This section lists the exhibits included in the report, specifically certifications required by the Sarbanes-Oxley Act of 2002 - Exhibits include Certification of the Corporate Trustee pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[76]