MARINE PETROLEUM TRUST 10-K

ITEM 1. BUSINESS Organization . 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 (“Simmons”) became corporate trustee of the Trust as a result of a merger between Simmons 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. The change in trustee from Simmons to Argent Trust Company was effective on December 30, 2022. 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 Trust’s predecessors and Gulf Oil Corporation (“Gulf”). As a result of various transactions that have occurred since 1956, these interests were largely held by Chevron Corporation (“Chevron”) and are now predominately held by its assignees, including Arena Energy, LP (“Arena,” and collectively with Chevron and its assignees, the “Interest Owners”). The Trust holds title to interests in properties that are situated offshore of Texas. The Indenture provides that the corporate trustee is to distribute all cash in the Trust, less an amount reserved for the payment of accrued liabilities and estimated future expenses, to unitholders of record on the last business day of February, May, August and November. Payments are to be made on the 28 th day of September, December, March and June of each fiscal year. If the 28 th falls on a Saturday, Sunday or legal holiday, the distribution is payable on the next succeeding business day. The Indenture prohibits the operation of any kind of trade or business by the Trust and also 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. Effective October 19, 2017, Simmons First National Corporation (“SFNC”) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank. SFNC is the parent of Simmons. SFNC merged Southwest Bank, the former corporate trustee of the Trust, with Simmons effective February 20, 2018. Effective December 30, 2022, Argent Trust Company succeeded Simmons as the corporate trustee of the Trust following Simmons resignation as trustee. The defined term “Trustee” as used herein shall refer to Simmons for periods on and after February 20, 2018 through December 29, 2022, and to Argent Trust Company for periods on and after December 30, 2022. The Trust’s 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. Ninety-eight percent of all oil, natural gas, and other mineral royalties collected by MPC, less the receiving and collection costs, are retained by and delivered to the Trust. MPC retains the remaining two percent of the overriding royalties along with other items of income and expense until the board of directors declares a dividend out of the corpus. MPC, like the Trust, 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. Marine’s only industry segment or purpose is the administration and collection of royalties. Royalties . Marine’s rights are generally referred to as overriding royalty interests in the oil and natural gas industry, and are sometimes referred to as overriding royalty interests in this Annual Report on Form 10-K. An overriding royalty interest is created by an assignment by the owner of a working interest in an oil or natural gas lease. 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. Marine holds an overriding royalty interest equal to three-fourths of 1% of the value at the well of any oil, natural gas, or other minerals produced and sold from the leases described in the “Properties” section below. Marine’s overriding royalty interest applies only to existing leases and does not apply to new leases that the Interest Owners may acquire. 1 Table of Contents Marine also previously owned a 32.6% interest in Tidelands Royalty Trust “B” (“Tidelands”), a separate Texas trust. Tidelands was a reporting company under the Securities Exchange Act of 1934, as amended. On March 8, 2019, Tidelands terminated the registration of its units under Section 12(g) of the Exchange Act, and suspended its reporting obligations under Section 13(a) of the Exchange Act. As of that date, Tidelands’ obligations to file certain reports with the SEC, including annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K, respectively, were automatically and immediately suspended. The term of Tidelands expired in 2021. Tidelands has been wound up and declared January 31, 2022 as the record date for the final distribution which was paid in February 2022. As of the date of filing of this Annual Report on Form 10-K, the leases subject to Marine’s interests cover an aggregate of 199,868 gross acres. These leases will remain in force until the leases terminate or expire pursuant to their respective terms. Leases may be voluntarily released by the working interest owner after oil and natural gas reserves are produced. Leases may also be abandoned by the working interest owner due to the failure to discover and produce sufficient reserves to make development economically worthwhile. In addition, the U.S. federal government may terminate a lease if the working interest owner fails to develop a lease once it is acquired. For the fiscal year ended June 30, 2023, approximately 95% of Marine’s royalty revenues were attributable to the sale of oil and approximately 5% of Marine’s royalty revenues were attributable to the sale of natural gas. The royalty revenues received by Marine are affected by a number of factors, including seasonal fluctuations in demand, the ability of wells to produce due to depletion and changes in the market prices for oil and natural gas. The following table presents the percent of royalties received from various working interest owners, which account for the royalties received in each of the past three years. Fiscal Year Ended June 30, Company 2023 2022 2021 Arena Energy, LP 99 % 99 % 99 % Chevron USA, Inc. 1 % 0 % 1 % Walter Oil & Gas Corporation 0 % 1 % 0 % 100 % 100 % 100 % In addition, Marine did not have any revenues from its interest in Tidelands for the fiscal year ended June 30, 2021. However, Marine received $93,134 as a final distribution from Tidelands during the fiscal year ended June 30, 2022. Marine derives no revenues from foreign sources and has no export sales. Trust Functions . The Trust is administered by officers and employees of its Trustee. The Trust has no employees. See “ Item 10. Directors, Executive Officers and Corporate Governance .” All aspects of Marine’s operations are conducted by third parties. These operations include the production and sale of oil and natural gas and the calculation of royalty payments to Marine, which are conducted by oil and natural gas companies that lease tracts subject to Marine’s interests. American Stock Transfer and Trust Company, LLC is the transfer agent for Marine and is responsible for reviewing, processing and paying distributions. The ability of Marine to receive revenues is entirely dependent upon its rights with respect to the leases held by the Interest Owners in the Gulf of Mexico (as more fully described in “ Item 2. Properties ” below). Moreover, no revenues are payable to Marine until sales of production commence from any such lease. The royalty interests held by Marine are depleting with each barrel of oil and cubic foot of natural gas produced. No funds are reinvested by Marine; thus, these depleting assets are not being replaced. 2 Table of Contents Widely Held Fixed Investment Trust Reporting Information. 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). Therefore, the Trustee considers the Trust to be a widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. Accordingly, the Trust will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT. The Trustee that will provide the required information and the contact information for the Trustee is as follows: Argent Trust Company 3838 Oak Lawn Avenue, Suite 1720 Dallas, Texas 75219 Telephone number: (855) 588-7839 Each unitholder should consult its own tax advisor for compliance with U.S. federal income tax laws and regulations.