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Item 1. Financial Statements

2021-02-16 compared with 2020-11-16 · 127 added, 96 removed, 222 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

As of September 30, 2020 and June 30, 2020

September 30,

As of December 31, 2020 and June 30, 2020

Current assets:

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CONDENSED CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME

For the Three Months Ended September 30, 2020 and 2019

For the Three and Six Months Ended December 31, 2020 and 2019

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, 2020 and 2019

For the Six Months Ended December 31, 2020 and 2019

Six Months Ended

Trust corpus, beginning of period

Distributable income

Distributions to unitholders

Trust corpus, end of period

Distributions per unit

See accompanying notes to condensed consolidated financial statements.

MARINE PETROLEUM TRUST AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS

For the Three Months Ended December 31, 2020 and 2019

Three Months Ended

September 30,

Trust corpus, beginning of period

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Accounting Policies

The financial statements herein include the financial statements of Marine Petroleum Trust (the Trust) and its wholly owned

subsidiary, Marine Petroleum Corporation (MPC, and collectively with the Trust, Marine).

The financial statements are condensed and consolidated and should be read in conjunction with Marines Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

The financial statements included herein are unaudited, but in the opinion of Simmons Bank (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, 2021.

December 31, 2020

The financial statements herein include the financial statements of Marine Petroleum Trust (the Trust) and its

wholly owned subsidiary, Marine Petroleum Corporation (MPC, and collectively with the Trust, Marine).

The financial statements are condensed and consolidated and should be read in conjunction with Marines Annual Report

on Form 10-K for the fiscal year ended June 30, 2020.

The financial statements included herein are unaudited, but in the opinion of Simmons Bank (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, 2021.

Basis of Accounting

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Total estimated reserve for future expenses deducted from

calculated distributable income for the three months ended September 30, 2020 was $66,500.

calculated distributable income for the three months ended December 31, 2020 was $76,500.

As stated under Note 1.

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Investment in Affiliate Tidelands Royalty Trust B

At September 30, 2020 and 2019, the Trust owned 32.6% of the outstanding units of beneficial interest in Tidelands.

At December 31, 2020 and 2019, the Trust owned 32.6% of the outstanding units of beneficial interest in Tidelands.

The following summary financial statements have been derived from the unaudited condensed consolidated financial statements of Tidelands:

TIDELANDS CONDENSED CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME

September 30,

Distributable income (loss) before Federal income taxes

Distributable (loss) before Federal income taxes

Federal income taxes of Tidelands subsidiary

Distributable income (loss)

Distributable (loss)

Tidelands was a reporting company under the Securities Exchange Act of 1934, as amended.

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Trustees Discussion and Analysis of Financial Condition and Results of Operations

Marine Petroleum Trust (the Trust) is a royalty trust that was created in 1956 under the laws of the State of Texas.

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

The Trusts Indenture (the

Indenture) stated that the Trust would expire on June 1, 2021.

In preparing to seek approval to extend the Trust for another twenty years to June 1, 2041 pursuant to Article X, Section 1(a) of the Indenture, the Trust

became aware that the necessary approval for this extension, which requires the consent of a majority of the outstanding of units of interest, was obtained on May 22, 2014 by a consent solicitation filed with the Securities and Exchange

Commission when holders of 63.57% of the outstanding units of interest on the record date of March 28, 2014 approved the extension of the Trust through June 1, 2041.

Less than 1% of the outstanding units of interest were voted against the

Since only the approval of a majority of the outstanding units of interest was required and not 80% as was believed to be the case at the time of the 2014 consent solicitation, the 63.57% approval authorized the extension of the Trust

through June 1, 2041.

The Trust is not permitted to engage in any business activity because it was organized for the sole purpose of

providing an efficient, orderly and practical means for the administration and liquidation of rights to payments from certain oil and natural gas leases in the Gulf of Mexico, pursuant to license agreements and amendments between the Trusts

predecessors and Gulf Oil Corporation (Gulf).

As a result of various transactions that have occurred since 1956, these interests now are held by Chevron Corporation (Chevron) and its assignees, including Arena Energy, LP

(collectively with Chevron and its assignees, the Interest Owners).

Marine Petroleum Trust (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 (the Trustee) as a result of a merger between

Simmons Bank and Southwest Bank, the former corporate Trustee of the Trust.

The Trusts Indenture (the 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.

The Trust is not permitted to engage in any business activity because it was

organized for the sole purpose of providing an efficient, orderly and practical means for the administration and liquidation of rights to payments from certain oil and natural gas leases in the Gulf of Mexico, pursuant to license agreements and

amendments between the Trusts predecessors and Gulf Oil Corporation (Gulf).

As a result of various transactions that have occurred since 1956, these interests now are held by Chevron Corporation (Chevron) and its

assignees, including Arena Energy, LP (collectively with Chevron and its assignees, the Interest Owners).

The Trust holds title to interests in properties that are situated offshore of Texas.

The Trusts wholly owned subsidiary, Marine Petroleum Corporation (MPC, and

collectively with the Trust, Marine), holds title to interests in properties that are situated offshore of Louisiana because at the time the Trust was created, trusts could not hold these interests under Louisiana law.

MPC is prohibited

from engaging in a trade or business and only takes those actions that are necessary for the administration and liquidation of its properties.

Marines rights are generally referred to as overriding royalty interests in the oil and natural gas industry.

An overriding royalty

interest is created by an assignment by the owner of a working interest in an oil or natural gas lease.

The royalty rights associated with an overriding royalty interest terminate when the underlying lease terminates.

All production and marketing

functions are conducted by the working interest owners of the leases.

Income from overriding royalties is paid to Marine either (i) on the basis of the selling price of oil, natural gas and other minerals produced, saved or sold, or

(ii) at the value at the wellhead as determined by industry standards, when the selling price does not reflect the value at the wellhead.

The Trusts wholly owned subsidiary, Marine Petroleum Corporation (MPC, and collectively with the Trust, Marine),

holds title to interests in properties that are situated offshore of Louisiana because at the time the

Trust was created, trusts could not hold these interests under Louisiana law.

MPC is prohibited from engaging in a trade or business and only takes those actions that are necessary for the

administration and liquidation of its properties.

Marines rights are generally referred to as overriding royalty interests in the

oil and natural gas industry.

An overriding royalty interest is created by an assignment by the owner of a working interest in an oil or natural gas lease.

The royalty rights associated with an overriding royalty interest terminate when the

underlying lease terminates.

All production and marketing functions are conducted by the working interest owners of the leases.

Income from overriding royalties is paid to Marine either (i) on the basis of the selling price of oil, natural gas

and other minerals produced, saved or sold, or (ii) at the value at the wellhead as determined by industry standards, when the selling price does not reflect the value at the wellhead.

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

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Each unitholder should consult its own tax advisor for compliance with U.S.

federal income tax laws and regulations.

federal income tax laws and

Commodity Prices

The Trusts 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 Trustees control.

Trusts 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 Trustees control.

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

12 unchanged sentences

be affected, gas royalty income for a given period generally relates to production three months prior to the period and crude oil royalty income for a given period generally relates to production two months prior to the period and will generally

approximate current market prices in the geographic region of the

production at the time of production.

approximate current market prices in the geographic region of the production at the time of production.

When crude oil and natural gas prices decline, the Trust is affected in two ways.

First, distributable income from the Trusts royalty properties is

First, distributable income from the Trusts royalty

properties is reduced.

Second, exploration and development activity by operators on the Trusts royalty properties may decline as some projects may become uneconomic and are either delayed or eliminated.

It is impossible to predict future crude oil and

natural gas price movements, and this reduces the predictability of future cash distributions to unitholders.

It is impossible to predict future crude

oil and natural gas price movements, and this reduces the predictability of future cash distributions to unitholders.

Liquidity and Capital Resources

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The public records available up to the date of this

report indicate that there were no new well completions made during the three months ended September 30, 2020 on leases in which Marine has an interest.

As of November 1, 2020, public records also indicated that there were no wells in the

report indicate that there were no new well completions made during the three months ended December 31, 2020 on leases in which Marine has an interest.

As of February 1, 2021, public records also indicated that there were no wells in the

process of being drilled or recompleted on other leases in which Marine has an interest.

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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, 2020.

see Marines Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for a detailed discussion of its critical accounting policies.

Marine did not have any changes in its critical accounting policies or estimates during the three and six months ended December 31, 2020.

Please see Marines Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for a detailed discussion of its critical accounting policies.

New Accounting Pronouncements

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Summary of Operating Results

three months ended September 30, 2020, the Trust realized approximately 93% of its royalty income from the sale of oil and approximately 7% of its royalty income from the sale of natural gas.

During the three months ended September 30,

2019, the Trust realized approximately 86% of its royalty income from the sale of oil and approximately 14% of its royalty income from the sale of natural gas.

six months ended December 31, 2020, the Trust realized approximately 95% of its royalty income from the sale of oil and approximately 5% of its royalty income from the sale of natural gas.

During the six months ended December 31, 2019, the

Trust realized approximately 86% of its royalty income from the sale of oil and approximately 14% of its royalty income from the sale of natural gas.

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

Distributable income per unit for the three months ended September 30, 2020 was $0.02 as compared to $0.07 for the comparable period in

Distributions per unit amounted to $0.04 per unit for the three months ended September 30, 2020, a decrease from distributions of $0.09 per unit for the comparable period in 2019.

For the three months ended September 30, 2020, oil production decreased to 2,148 barrels (bbls) from 2,700 bbls and natural gas

production decreased to 2,154 thousand cubic feet (mcf) from 10,542 mcf as compared to the comparable period in 2019.

For the three months ended September 30, 2020, the average price realized for oil decreased to $23.19 per bbl as compared

to the price of $63.13 realized for the comparable period in 2019 and the average price realized for natural gas (net of expenses) decreased to $1.78 per mcf as compared to the average price of $2.64 realized for the comparable period in 2019.

The following table presents the net production quantities of oil and natural gas and

distributable income and distributions per unit for the last six quarters.

Distributable income per unit for the six months ended December 31, 2020 was $0.02 as compared to $0.12 for the comparable period in

Distributions per unit amounted to $0.05 per unit for the six months ended December 31, 2020, a decrease from distributions of $0.13 per unit for the comparable period in 2019.

During the six months ended December 31, 2020, the

difference between distributable income per unit and distributions per unit resulted from timing differences between the closing of the financial statements and the determination date of the distribution amount to unitholders.

For the six months ended December 31, 2020, oil production decreased to 4,659 barrels (bbls) from 4,823 bbls and natural gas production

decreased to 4,118 thousand cubic feet (mcf) from 18,691 mcf as compared to the comparable period in 2019.

For the six months ended December 31, 2020, the average price realized for oil decreased to $31.70 per bbl as compared to the price

of $60.57 realized for the comparable period in 2019 and the average price realized for natural gas (net of expenses) decreased to $1.82 per mcf as compared to the average price of $2.54 realized for the comparable period in 2019.

The following table presents the net production quantities of oil and natural gas and distributable income and distributions per unit for the

last six quarters.

Net Production

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Distributable

Income Per Unit

Distributions

June 30, 2019

September 30, 2019

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September 30, 2020

December 31, 2020

Excludes the Trusts interest in Tidelands.

Results of OperationsThree Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

Income from oil and natural gas royalties, decreased to $53,639 during the three months ended September 30, 2020 from $198,248 realized

Results of OperationsThree Months Ended December 31, 2020 Compared to the Three Months Ended December 31, 2019

Income from oil and natural gas royalties, decreased to $101,545 during the three months ended December 31, 2020 from $141,361 realized

for the comparable period in 2019.

Royalties decreased for the three months ended September 30, 2020 as compared to the comparable period in 2019 primarily due to a decrease in production of oil and gas, and also by a sharp decrease in pricing

of oil and gas.

Distributable income decreased to $33,027 for the three months ended September 30, 2020 from $135,538 realized for

the comparable period in 2019.

Income from oil royalties, for the three months ended September 30, 2020 decreased to $49,795 from

Royalties decreased for the three months ended December 31, 2020 as compared to the comparable period in 2019 primarily due to a decrease in production of gas, and also by a sharp decrease in pricing of oil

Distributable income decreased to $4,962 for the three months ended December 31, 2020 from $108,452 realized for the

comparable period in 2019.

Income from oil royalties, for the three months ended December 31, 2020 decreased to $97,903 from

$121,686 realized for the comparable period in 2019.

The volume of oil sold in the three months ended September 30, 2020 decreased to 2,148 bbls from 2,700 bbls realized for the comparable period in 2019, and the average price realized for oil

decreased to $23.19 per bbl for the three months ended September 30, 2020 from $63.13 per bbl realized for the comparable period in 2019.

Income from natural gas royalties (net of expenses), for the three months ended September 30, 2020 decreased to $3,844 from $27,832 for

The volume of oil sold in the three months ended December 31, 2020 increased to 2,512 bbls from 2,123 bbls realized for the comparable period in 2019, and the average price realized for oil

decreased to $38.98 per bbl for the three months ended December 31, 2020 from $57.32 per bbl realized for the comparable period in 2019.

Income from natural gas royalties (net of expenses), for the three months ended December 31, 2020 decreased to $3,642 from $19,675 for

the comparable period in 2019.

The volume of natural gas sold in the three months ended September 30, 2020 decreased to 2,154 mcf from 10,542 mcf realized for the comparable period in 2019, and the average price realized for natural gas (net of

expenses) decreased to $1.78 per mcf for the three months ended September 30, 2020 from $2.64 per mcf realized for the comparable period in 2019.

We did not receive any income from distributions from Tidelands for the three months ended September 30, 2020 and 2019.

We understand

that Tidelands does not currently have sufficient production in economic quantities to generate any revenue to be distributed to its unitholders.

The volume of natural gas sold in the three months ended December 31, 2020 decreased to 1,965 mcf from 8,150 mcf realized for the comparable period in 2019, and the average price realized for natural gas (net of

expenses) decreased to $1.85 per mcf for the three months ended December 31, 2020 from $2.41 per mcf realized for the comparable period in 2019.

We did not receive any income from distributions from Tidelands for the three months ended December 31, 2020 and 2019.

We understand that

Tidelands does not currently have sufficient production in economic quantities to generate any revenue to be distributed to its unitholders.

The following table presents the quantities of oil and natural gas sold and the average price realized for the three months ended

September 30, 2020, and those realized for the comparable period in 2019.

Three Months Ended September 30,

December 31, 2020, and those realized for the comparable period in 2019.

Three Months Ended December 31,

Average price

Average price, net of expenses

General and administrative expenses decreased to $20,714 for the three months ended September 30, 2020

from $68,154 for the comparable period of 2019, primarily due to a decrease in legal and accounting expenses due to timing of expenses relating to the closing of the annual financial statements which were incurred in the first quarter of fiscal year

2020 compared to the second quarter of fiscal year 2021.

General and administrative expenses increased to $96,583 for the three months ended

December 31, 2020 from $37,196 for the comparable period of 2019, primarily due to the timing of expenses related to the closing of the annual financial statements which expenses were incurred in the quarter ended December 31, 2020

compared to the quarter ended September 30, 2019 for the previous year.

Results of OperationsSix Months Ended December 31, 2020

Compared to the Six Months Ended December 31, 2019

Income from oil and natural gas royalties, excluding the Trusts interest

in Tidelands, decreased to $155,185 during the six months ended December 31, 2020 from $339,609 realized for the comparable period in 2019.

Royalties decreased for the six months ended December 31, 2020 primarily due to a decrease in the

price and production of oil as well as a decrease in natural gas production.

Distributable income decreased to $37,989 for the six months

ended December 31, 2020 from $243,991 realized for the comparable period in 2019.

Income from oil royalties for the six months ended

December 31, 2020 decreased to $147,699 from $292,101 realized for the comparable period in 2019.

The volume of oil sold in the six months ended December 31, 2020 decreased to 4,659 bbls from 4,823 bbls realized for the comparable period

in 2019, and the average price realized for oil decreased to $31.70 per bbl for the six months ended December 31, 2020 from $60.57 per bbl realized for the comparable period in 2019.

Income from natural gas royalties (net of expenses) for the six months ended December 31, 2020 decreased to $7,487 from $47,508 for the

comparable period in 2019.

The volume of natural gas sold in the six months ended December 31, 2020 decreased to 4,118 mcf from 18,691 mcf realized for the comparable period in 2019, and the average price realized for natural gas (net of

expenses) decreased to $1.82 per mcf for the six months ended December 31, 2020 from $2.54 per mcf realized for the comparable period in 2019.

We did not receive any income from distributions from Tidelands for the six months ended December 31, 2020 and 2019.

We understand that

Tidelands does not currently have sufficient production in economic quantities to generate any revenue to be distributed to its unit holders.

Accordingly, we do not expect to receive any income from distributions from Tidelands in future quarters.

The following table presents the quantities of oil and natural gas sold and the average price realized for the six months ended

December 31, 2020, and those realized for the comparable period in 2019, excluding the Trusts interest in Tidelands.

Six Months Ended December 31,

Average price

Average price, net of expenses

General and administrative expenses increased to $117,298 for the six months ended December 31, 2020 from

$105,349 for the comparable period of 2019, primarily due to increased printing fees and professional expenses as well as an increase in trustee expenses due to the timing of monthly payments.

Forward-Looking Statements

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Quantitative and Qualitative Disclosures About Market Risk

There there has been no material change from the information provided in Marines Annual Report on

Form 10-K, Item 7A:

There has been no material change from the information provided in

Marines Annual Report on Form 10-K, Item 7A:

Quantitative and Qualitative Disclosures About Market Risk, for the fiscal year ended June 30, 2020.

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 1. Financial Statements