MARINE PETROLEUM TRUST 10-K

ITEM 2. PROPERTIES General . Marine is not engaged in oil and natural gas exploration or production operations, and its only industry segment or purpose is the administration and collection of royalties. Marine’s income is based upon the oil and natural gas operations of third parties. Marine’s income is derived from contracts that provide for payments in the nature of overriding royalties made to Marine based on oil and natural gas sales from certain leases in the Gulf of Mexico. Marine does not own or directly lease any physical properties. Reserves . As indicated above, Marine is not engaged in the exploration or production of oil or natural gas. Marine’s income is derived from overriding royalty payments that are carved out of working interests in oil and natural gas leases in the Gulf of Mexico. Marine does not have the engineering data necessary to make an estimate of the proved oil and natural gas reserves attributable to such working interests (nor the present value of future net cash flows from such reserves), and Marine is not entitled to receive such data from the owners of the working interests from which its interests are derived. Similarly, Tidelands does not have access to the engineering data necessary to make an estimate of the proved oil and natural gas reserves attributable to such working interests. See also “— Difficulty in Obtaining Certain Data. ” Since Marine does not have access to this reserve information, Marine is unable to compute the standardized measure of discounted future net cash flows attributable to such working interests. Marine did not file any reports during the fiscal year ended June 30, 2020 with any U.S. Federal authority or agency with respect to oil and natural gas reserves. Due to the nature of Marine’s business, it does not have any delivery commitments. 8 Table of Contents Production . Information regarding the net quantities of oil and natural gas sold with respect to Marine’s overriding royalty interests (excluding its interest in Tidelands) for each of the last three fiscal years, as well as the average sales price per unit of oil and natural gas sold upon which payments to Marine are based, is set forth in the following table: Fiscal Year Ended June 30, 2020 2019 2018 Net quantities sold: Oil (in barrels (“bbls”)) 12,628 11,382 15,138 Natural gas (in thousands of cubic feet (“mcf”)) 33,639 22,147 20,664 Average sales price for royalty oil and natural gas sold: Oil (per bbl) (1) $ 54.79 $ 66.85 $ 50.76 Natural gas, net of expenses (per mcf) (1) $ 2.44 $ 3.52 $ 3.10 (1) The average sales price is calculated from data provided by the operators. Information about average production cost (lifting cost) per unit of production has been omitted due to its unavailability and inapplicability to Marine. For more recent information regarding prices, see “ Item 7. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations. ” Productive Wells . Based on the latest public records reviewed by Marine from the Bureau of Ocean Energy Management, Regulation and Enforcement, a division of the U.S. government, there were approximately 201 gross active wells subject to Marine’s interests (excluding its interest in Tidelands). Marine believes that the term “active wells” is synonymous with the term “productive wells” as defined in Item 1205 of Regulation S-K. While Marine believes that most of the active wells produce both oil and natural gas, Marine is unable to determine the actual number of wells classified as either oil or natural gas wells without unreasonable effort and expense. See “— Difficulty in Obtaining Certain Data. ” Drilling Activity . During each of the fiscal years 2020, 2019 and 2018, there were no wells drilled or recompleted in which Marine has an interest (excluding its interest in Tidelands). Information regarding net wells or acres is not included since Marine does not own any working interests. Lease Acreage . As of June 30, 2020, Marine had an overriding royalty interest (including its interest in Tidelands) in 59 different oil and natural gas leases covering an aggregate of 217,056 gross acres. These leases are located in the Central and Western areas of the Gulf of Mexico off the coasts of Louisiana and Texas. This acreage is presented in the following table: Leases Granted by (1) : Producing Acreage United States 211,526 State of Texas 640 State of Louisiana 4,890 217,056 (1) 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. In some cases, that area does not cover an entire lease block. In those cases, Marine’s royalty interest only applies to the area that lies within the lease. Of the aggregate of 217,056 total gross acres in which Marine has an overriding royalty interest, there are 210 gross acres located on leases that have commercial production, but the production is not on Marine’s overriding royalty area within those leases. 9 Table of Contents The overriding royalty interest owned by Marine is three-fourths of 1% of the working interest held by the Interest Owners. The fractional interest therefore varies from lease to lease. The acreage weighted average of the fractional interest in all leases, including Marine’s interest in the leases held by Tidelands, is 0.5776%. The following table presents the acreage breakdown by fractional interests of Marine and Tidelands: Trust Gross Acres Interest Tidelands 17,188 1.01137 % Marine 105,672 0.7500 % Marine 1,527 0.5000 % Marine 40,151 0.3750 % Marine 52,518 0.2006 % Summary 217,056 0.5776 % Present Activities . As of June 30, 2020, public records indicated that no wells were being drilled, re-drilled or worked over on tracts in which Marine has an interest. Additionally, public records indicated that operators had not designated any locations for additional operations, which may include drilling, permits to work over or recomplete a well or other types of operations. There is no assurance that wells will be drilled, and if they are drilled, that they will be successful. Marine is not obligated to provide any fixed and determinable quantities of oil or natural gas in the future under any existing contracts or agreements. Difficulty in Obtaining Certain Data . Marine’s only activities are the collection and distribution of revenues from overriding royalties on certain oil and natural gas leases in the Gulf of Mexico, pursuant to purchase agreements between Marine’s predecessors and Gulf and its transferees. The leasehold working interests that are subject to the rights held by Marine are owned, in most cases, in whole or in part by Chevron, or other oil and natural gas exploration and production companies. Certain information with respect to the particular leases subject to Marine’s interests, including, but not limited to, (i) reserves, (ii) the availability of oil and natural gas, (iii) the average production cost (lifting cost) per unit, (iv) undeveloped acreage and (v) net wells and net acres, lies solely within the knowledge of these working interest owners. Marine does not have access to engineering data regarding these leaseholds and believes that such information would have been compiled principally by or for the working interest owners of these leaseholds, and that such information is unreasonably difficult for Marine to obtain. As a result, Marine believes that unreasonable efforts and expense would be involved in seeking to obtain all of the information required under Item 102 and Subpart 1200 of Regulation S-K. ITEM 3. LEGAL PROCEEDINGS To their knowledge, neither the Trust nor MPC, nor any of their respective properties, is a party to or subject to any material pending litigation as of the date hereof. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 10 Table of Contents PART II