What changed in this filing

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Item 1A. Risk Factors

2025-02-13 compared with 2024-11-12 · 83 added, 55 removed, 208 unchanged (40% of the section changed)

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CONDENSED CONSOLIDATED STATE MENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

As of September 30, 2024 and June 30, 2024

September 30,

As of December 31, 2024 and June 30, 2024

Current assets:

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CONDENSED CONSOLIDATED STATE MENTS OF DISTRIBUTABLE INCOME

For the Three Months Ended September 30, 2024 and 2023

For the Three Month and Six Months Ended December 31, 2024 and 2023

Three Months Ended

September 30,

Six Months Ended

Oil and natural gas royalties

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS

For the Three Months Ended September 30, 2024 and 2023

For the Six Months Ended December 31, 2024 and 2023

Six Months Ended

Trust corpus, beginning of period

Distributable income

Distributions to unitholders

Trust corpus, end of period

Distributions per unit

For the Three Months Ended December 31, 2024 and 2023

Three Months Ended

September 30,

Trust corpus, beginning of period

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NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

September 30, 2024

December 31, 2024

Accounting Policies

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The financial statements are condensed and consolidated and should be read in conjunction with Marine’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

The financial statements included herein are unaudited, but in the opinion of Argent Trust Company (the “Trustee”), the Trustee of the Trust, they include all adjustments necessary for a fair presentation of the results of operations for the periods presented.

The financial statements included herein are unaudited, but in the opinion of Argent Trust Company, a Tennessee chartered trust company (“Argent Trust Company”

or the “Trustee”), the Trustee of the Trust, they include all adjustments necessary for a fair presentation of the results of operations for the periods presented.

Operating results for the interim periods reported herein are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2025.

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Royalty income is recognized in the month when received by Marine rather than in the month of production.

Marine’s expenses (including accounting, legal, other professional fees, trustee's fees and out-of-pocket expenses) are recorded on an actual paid basis in the month paid rather than in the month incurred.

Marine’s expenses (including accounting, legal, other professional fees, trustee’s fees and out-of-pocket expenses) are recorded on an actual paid basis in the month paid rather than in the month incurred.

Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary, which would not be recorded under GAAP.

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If the 28th day falls on a Saturday, Sunday or legal holiday, the payments are to be made on the immediately succeeding business day.

Total estimated reserve for future expenses deducted from calculated distributable income for the three months ended September 30, 2024 was $104,500.

Total estimated reserve for future expenses deducted from calculated distributable income for the three months ended December 31, 2024 was $102,500.

As stated under “Note 1.

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Distributable income is comprised of (i) royalties from offshore Texas leases owned directly by the Trust, (ii) 98% of the royalties received from offshore Louisiana leases owned by MPC, which are retained by and delivered to the Trust on a quarterly basis, (iii) cash distributions from the Trust’s interest in Tidelands Royalty Trust “B”

(“Tidelands”), a separate royalty trust, until Tidelands was wound up, (iv) dividends paid by MPC, less (v) administrative expenses incurred by the Trust.

(“Tidelands”), a separate royalty trust in which the Trust had a beneficial interest, until Tidelands was wound up in June 2022, (iv) dividends paid by MPC, less (v) administrative expenses incurred by the Trust.

Distributions fluctuate from quarter to quarter primarily due to changes in oil and natural gas prices and production quantities and expenses incurred.

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The Trust is a royalty trust that was created in 1956 under the laws of the State of Texas.

Effective February 20, 2018, Simmons Bank became corporate trustee of the Trust (“Simmons”) as a result of a merger between Simmons Bank and Southwest Bank, the

former corporate trustee of the Trust.

On November 4, 2021, Simmons announced that it had entered into an agreement with Argent Trust Company, a Tennessee chartered trust company (the “Trustee”), pursuant to which Simmons would resign as trustee of the Trust and nominate Argent Trust Company as successor trustee of the Trust.

Effective February 20, 2018, Simmons Bank became corporate trustee of the Trust (“Simmons”) as a result of a merger between Simmons Bank and Southwest Bank, the former corporate trustee of the Trust.

On November 4, 2021, Simmons announced that it had entered into an agreement with Argent Trust Company, pursuant to which Simmons would resign as trustee of the Trust and nominate Argent Trust Company as successor trustee of the Trust.

The change in trustee from Simmons to Argent Trust Company was effective on December 30, 2022.

The defined term "Trustee" as used herein shall refer to Southwest Bank for periods from 2014 through February 19, 2018, shall refer to Simmons for periods on and after February 20, 2018 through December 29, 2022, and shall refer to Argent Trust Company for periods on and after December 30, 2022.

The defined term “Trustee”

as used herein shall refer to Southwest Bank for periods from 2014 through February 19, 2018, shall refer to Simmons for periods on and after February 20, 2018 through December 29, 2022, and shall refer to Argent Trust Company for periods on and after December 30, 2022.

The Trust’s Indenture provides that the term of the Trust will expire on June 1, 2041, unless extended by the vote of the holders of a majority of the outstanding units of beneficial interest.

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The Trustee assumes that some units of beneficial interest are held by middlemen, as such term is broadly defined in U.S.

Treasury Regulations (and includes custodians, nominees, certain joint owners and brokers holding an interest for a customer in street name, collectively referred to herein as "middlemen").

Treasury Regulations (and includes custodians, nominees, certain joint owners and brokers holding an interest for a customer in street name, collectively referred to herein as “middlemen”).

Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S.

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Notwithstanding the foregoing, the middlemen holding Trust units on behalf of unitholders, and not the Trustee of the Trust, are solely responsible for complying with the information reporting requirements under the U.S.

Treasury Regulations with respect to such Trust units, including the issuance of IRS Forms 1099 and certain written tax statements.

Treasury Regulations with respect to such Trust units, including the issuance of Internal Revenue Service Forms 1099 and certain written tax statements.

Unitholders whose Trust units are held by middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the Trust units.

Each unitholder should consult its own tax advisor regarding Trust tax compliance matters.

Each unitholder should consult their own tax advisor regarding Trust tax compliance matters.

Commodity Prices

The Trust’s income and monthly distributions are heavily influenced by commodity prices.

Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil and natural gas, (ii) market uncertainty and (iii) a

variety of additional factors that are beyond the Trustee’s control.

Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil and natural gas, (ii) market uncertainty and (iii) a variety of additional factors that are beyond the Trustee’s control.

Factors that may impact future commodity prices, including the price of oil and natural gas, include but are not limited to:

political conditions worldwide, and in particular, political disruptions, terrorist activities, wars or other armed conflicts in oil producing regions, including the war in Ukraine and the Israel-Hamas war;

worldwide economic conditions;

weather conditions;

trade barriers;

trade barriers and tariffs;

public health concerns;

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A grantor trust is not subject to tax at the trust level.

As a grantor trust, unitholders are taxed directly on their proportionate share of income, deduction and credit of the Trust consistent with each such unitholder's tax status and applicable facts as though no trust were in existence.

As a grantor trust, unitholders are taxed directly on their proportionate share of income, deduction and credit of the Trust consistent with each such unitholder’s tax status and applicable facts as though no trust were in existence.

The State of Texas imposes a franchise tax, but the Trust does not believe that it is subject to the franchise tax because at least 90% of its federal gross income is from passive sources.

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Marine has performed a review of the public records from the Bureau of Ocean Energy Management (BOEM) and Marine's revenue records provided by the operators.

Based on this information, Marine believes that as of September 30, 2024, Marine had an overriding royalty interest in 19 different oil and natural gas leases covering an aggregate of 87,326 gross acres.

Based on this information, Marine believes that as of December 31, 2024, Marine had an overriding royalty interest in 19 different oil and natural gas leases covering an aggregate of 87,326 gross acres.

The lease acreage is all located in federal waters in the Central and Western areas of the Gulf of Mexico off the coasts of Louisiana and Texas.

Leases are typically granted for a term of five years, during which the lease owner must establish commercial production, or the lease expires.

Marine’s overriding royalty area is determined by a contract that defines the area in which Marine is entitled to receive

a royalty interest.

Marine’s overriding royalty area is determined by a contract that defines the area in which Marine is entitled to receive a royalty interest.

In some cases, that area does not cover an entire lease block.

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Cash reserves are permitted to be established by the Trustee for certain contingencies that would not be recorded under generally accepted accounting principles in the United States.

Marine did not have any changes in its critical accounting policies or estimates during the three months ended September 30, 2024.

Marine did not have any changes in its critical accounting policies or estimates during the three and six months ended December 31, 2024.

Please see Marine’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for a detailed discussion of its critical accounting policies.

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Summary of Operating Results

During the three months ended September 30, 2024 the Trust realized approximately 92% of its royalty income from the sale of oil and approximately 8% of its royalty income from the sale of natural gas and natural gas liquids.

During the three months ended September 30, 2023, the Trust realized approximately 97% of its royalty income from the sale of oil and approximately 3% of its royalty

income from the sale of natural gas and natural gas liquids.

Royalty income includes royalties from oil and natural gas received from producers.

Distributable income per unit for the three months ended September 30, 2024 was $0.12 as compared to $0.11 for the comparable period in 2023.

Distributions per unit also amounted to $0.09 per unit for the three months ended September 30, 2024, a decrease from distributions of $0.12 per unit for the comparable period in 2023.

For the three months ended September 30, 2024, oil production decreased to 3,265 barrels (bbls) from 3,964 bbls.

Natural gas volumes sold increased to 5,095 thousand cubic feet (mcf) from 3,148 mcf and natural gas liquids sold increased from 5,512 mcf to 8,437 mcf for the three months ended September 30, 2024 as compared to the same period in 2023.

For the three months ended September 30, 2024, the average price realized for oil increased to $81.11 per barrel (bbl) as compared to the price of $72.19 per bbl realized for the comparable period in 2023.

During the six month period ending December 31, 2024, the Trust realized approximately 94% of its royalty income from the sale of oil and approximately 6% of its royalty income from the sale of natural gas and natural gas liquids.

During the six month period ending December 31, 2023, the Trust realized approximately 99% of its royalty income from the sale of oil and approximately 1% of

its royalty income from the sale of natural gas and natural gas liquids.

Royalty income includes royalties from oil, natural gas, and natural gas liquids received from producers.

Distributable income per unit for the six months ended December 31, 2024, was $0.16 as compared to $0.21 for the comparable period in 2023.

Distributions per unit also amounted to $0.20 per unit for the six months ended December 31, 2024, a decrease from distributions of $0.21 per unit for the comparable period in 2023.

For the six months ended December 31, 2024, oil production decreased to 5,263 barrels (bbls) from 7,041 bbls for the comparable period in 2023.

Natural gas volumes sold increased to 8,438 thousand cubic feet (mcf) from 5,439 mcf and natural gas liquids sold increased from 10,983 mcf to 14,930 mcf for the six months ended December 31, 2024, as compared to the same period in 2023.

For the six months ended December 31, 2024, the average price realized for oil increased to $79.17 per barrel (bbl) as compared to the price of $75.71 per bbl realized for the comparable period in 2023.

The average price realized for natural gas (net of expenses) increased to $2.43 per mcf as compared to the average price of $0.97 per mcf realized for the comparable period in 2023, and the average price realized for natural gas liquids (net of expenses) increased to $0.56 per mcf as compared to the average price of $0.17 per mcf realized for the comparable period in 2023.

Results of Operations—Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Income from oil and natural gas royalties decreased to $286,498 during the three months ended September 30, 2024 from $291,021 realized for the comparable period in 2023.

Royalties decreased for the three months ended September 30, 2024 as compared to the comparable period in 2023 primarily due to a decrease in the production of oil, partially offset by increases in the production of both natural gas and natural gas liquids, and by higher oil, natural gas, and natural gas liquids prices.

Distributable income increased to $233,552 for the three months ended September 30, 2024 from $228,057 realized for the comparable period in 2023.

Income from oil royalties, for the three months ended September 30, 2024 decreased to $264,786 from $286,168 realized for the comparable period in 2023.

The volume of oil sold in the three months ended September 30, 2024 decreased to 3,265 bbls from 3,964 bbls realized for the comparable period in 2023, and the average price realized for oil increased to $81.11 per bbl for the three months ended September 30, 2024 from $72.19 per bbl realized for the comparable period in 2023.

Income from natural gas royalties (net of expenses), for the three months ended September 30, 2024 increased to $15,362 from $3,964 for the comparable period in 2023.

The volume of natural gas sold in the three months ended September 30, 2024 increased to 5,095 mcf from 3,148 mcf realized for the comparable period in 2023, and the average price realized for natural gas (net of expenses) increased to $3.02 per mcf for the three months ended September 30, 2024 from $2.28 per mcf realized for the comparable period in 2023.

Income from natural gas liquids royalties (net of expenses), for the three months ended September 30, 2024 increased to $6,350 from $1,375 for the comparable period in 2023.

The volume of natural gas liquids sold in the three months ended September 30, 2024 increased to 8,437 mcf from 5,512 mcf realized for the comparable period in 2023, and the average price realized for natural gas liquids (net of expenses) increased to $0.75 per mcf for the three months ended September 30, 2024 from $0.51 per mcf realized for the comparable period in 2023.

The three months ended September 30, 2023 has been revised to present the natural gas liquids separately from natural gas.

Results of Operations—Three Months Ended December 31, 2024 Compared to the Three Months Ended December 31, 2023

Income from oil and natural gas royalties decreased to $159,064 during the three months ended December 31, 2024, from $249,200 realized for the comparable period in 2023.

Royalties decreased for the three months ended December 31, 2024 as compared to the comparable period in 2023 primarily due to a check from one remitter not being received and processed by the deadline to be included in this quarter’s distribution.

The decrease was partially offset by increases in the production of natural gas and natural gas liquids, and by higher natural gas, and natural gas liquids prices.

Distributable income decreased to $81,138 for the three months ended December 31, 2024, from $199,238 realized for the comparable period in 2023.

Income from oil royalties, for the three months ended December 31, 2024, decreased to $151,919 from $246,941 realized for the comparable period in 2023.

The volume of oil sold in the three months ended December 31, 2024, decreased to 1,999 bbls from 3,077 bbls realized for the comparable period in 2023, and the average price realized for oil decreased to $76.01 per bbl for the three months ended December 31, 2024, from $80.25 per bbl realized for the comparable period in 2023.

Income from natural gas royalties (net of expenses), for the three months ended December 31, 2024, increased to $5,090 from $1,737 for the comparable period in 2023.

The volume of natural gas sold in the three months ended December 31, 2024, increased to 3,343 mcf from 2,291 mcf realized for the comparable period in 2023, and the average price realized for natural gas (net of expenses) increased to $1.52 per mcf for the three months ended December 31, 2024, from $0.76 per mcf realized for the comparable period in 2023.

Income from natural gas liquids royalties (net of expenses), for the three months ended December 31, 2024, increased to $2,055 from $522 for the comparable period in 2023.

The volume of natural gas liquids sold in the three months ended December 31, 2024, increased to 6,493 mcf from 5,471 mcf realized for the comparable period in 2023, and the average price realized for natural gas liquids (net of expenses) increased to $0.32 per mcf for the three months ended December 31, 2024, from $0.10 per mcf realized for the comparable period in 2023.

The following table presents the quantities of oil, natural gas, and natural gas liquids sold and the average price realized for the three months ended December 31, 2024, and those realized for the comparable period in 2023.

The three months ended December 31, 2023 has been revised from the prior presentation to present the natural gas liquids separately from natural gas.

In previous years, the natural gas liquids revenue was included with the natural gas revenue and the average price of natural gas was calculated using the combined revenue number but did not include the natural gas liquids quantities sold.

The information in the table was revised for fiscal year 2023 to conform with the current year presentation to (i) provide natural gas liquids royalties, natural gas liquids quantities sold, and average sales price for natural gas liquids, (ii) update natural gas royalties to reflect the split from natural gas liquids royalties (the aggregate amount of natural gas royalties and natural gas liquids royalties is the same as previously reflected for fiscal year 2023 for natural gas royalties), and (iii) corrected average sales price for natural gas.

This change does not impact the prior years' financial statements or distributable income.

The following table presents the quantities of oil, natural gas, and natural gas liquids sold and the average price realized for the three months ended September 30, 2024, and those realized for the comparable period in 2023.

The information in the table below was revised for fiscal year 2023 to conform with the current year presentation to (i) provide natural gas liquids quantities sold, and average sales price for natural gas liquids and (ii) update the average sales price for natural gas.

The volumes for natural gas have not been changed.

These updates do not impact the prior years' financial statements or distributable income.

Three Months Ended

September 30,

Average price

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Average price

General and administrative expenses decreased to $68,640 for the three months ended September 30, 2024 from $76,618 for the comparable period of 2023, primarily due to the timing of payment of professional fees.

General and administrative expenses increased to $84,758 for the three months ended December 31, 2024 from $63,676 for the comparable period of 2023, primarily due to the timing of payment of professional fees.

Results of Operations—Six Months Ended December 31, 2024 Compared to the Six Months Ended December 31, 2023

Income from oil and natural gas royalties decreased to $445,562 during the six months ended December 31, 2024, from $540,221 realized for the comparable period in 2023.

Royalties decreased for the six months ended December 31, 2024, primarily due to a decrease in production of oil, offset somewhat by increases in the price of oil, natural gas and natural gas liquids, as well as increases in the production of natural gas and natural gas liquids.

Distributable income decreased to $314,690 for the six months ended December 31, 2024 from $427,295 realized for the comparable period in 2023.

Income from oil royalties for the six months ended December 31, 2024, decreased to $416,705 from $533,109 realized for the comparable period in 2023.

The volume of oil sold in the six months ended December 31, 2024, decreased to 5,263 bbls from 7,041 bbls realized for the comparable period in 2023, and the average price realized for oil inccreased to $79.17 per bbl for the six months ended December 31, 2024, from $75.71 per bbl realized for the comparable period in 2023.

Income from natural gas royalties (net of expenses) for the six months ended December 31, 2024, increased to $20,474 from $5,272 for the comparable period in 2023.

The volume of natural gas sold in the six months ended December 31, 2024, increased to 8,438 mcf from 5,439 mcf realized for the comparable period in 2023, and the average price realized for natural gas (net of expenses) decreased to $2.43 per mcf for the six months ended December 31, 2024, from $0.97 per mcf realized for the comparable period in 2023.

Income from natural gas liquids royalties (net of expenses), for the six months ended December 31, 2024, increased to $8,383 from $1,839 for the comparable period in 2023.

The volume of natural gas liquids sold in the six months ended December 31, 2024, increased to 14,930 mcf from 10,983 mcf realized for the comparable period in 2023, and the average price realized for natural gas liquids (net of expenses) increased to $0.56 per mcf for the six months ended December 31, 2024, from $0.17 per mcf realized for the comparable period in 2023.

The following table presents the quantities of oil and natural gas sold and the average price realized for the six months ended December 31, 2024, and those realized for the comparable period in 2023.

The six months ended December 31, 2023, has been revised from the prior presentation to present the natural gas liquids separately from natural gas.

The volumes for natural gas have not been changed.

These updates do not impact the prior years’

financial statements or distributable income.

Six Months Ended

Average price

Average price, net of expenses

Natural Gas Liquids

Average price

General and administrative expenses increased to $153,398 for the six months ended December 31, 2024 from $140,294 for the comparable period of 2023, primarily due to the timing of payment of professional fees.

Forward-Looking Statements

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files or submits under the Exchange Act is accumulated and communicated to the Trustee as appropriate to allow timely decisions regarding required disclosure

As of September 30, 2024, the Trustee carried out an evaluation of the effectiveness of the design and operation of Marine’s disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) of the Exchange Act.

Based upon that evaluation, the Trustee concluded that Marine’s disclosure controls and procedures were effective as of September 30, 2024.

As of December 31, 2024, the Trustee carried out an evaluation of the effectiveness of the design and operation of Marine’s disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) of the Exchange Act.

Based upon that evaluation, the Trustee concluded that Marine’s disclosure controls and procedures were effective as of December 31, 2024.

Changes in Internal Control Over Financial Reporting

There have not been any changes in Marine’s internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, Marine’s internal control over financial reporting.

There have not been any changes in Marine’s internal control over financial reporting during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, Marine’s internal control over financial reporting.

OT HER INFORMATION

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors