-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IG5Wz1Vf1TI+IUIg1vgKR8ewmMWypXmHug22kbGXLCfUHhD6QB9MXQWjVKcpJYnI 8boVTd9hyybG/OisNhTb0w== 0000950134-98-007775.txt : 19980929 0000950134-98-007775.hdr.sgml : 19980929 ACCESSION NUMBER: 0000950134-98-007775 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980928 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARINE PETROLEUM TRUST CENTRAL INDEX KEY: 0000062362 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 756008017 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-08565 FILM NUMBER: 98715503 BUSINESS ADDRESS: STREET 1: NATIONSBANK OF TEXAS N A STREET 2: P O BOX 831402 CITY: DALLAS STATE: TX ZIP: 75283-1402 BUSINESS PHONE: 2145081796 MAIL ADDRESS: STREET 1: P O BOX 831402 CITY: DALLAS STATE: TX ZIP: 75283-1402 10-K405 1 FORM 10-K405 FOR PERIOD ENDED JUNE 30, 1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] FOR THE FISCAL YEAR ENDED JUNE 30, 1998 OR [ ] FOR THE TRANSITION PERIOD FROM --------------- TO ---------------. COMMISSION FILE NO. 0-8565
MARINE PETROLEUM TRUST (Exact name of registrant as specified in its charter) TEXAS 75-6008017 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
C/O THE CORPORATE TRUSTEE: NATIONSBANK OF TEXAS, N.A. P.O. BOX 830241, DALLAS, TEXAS 75283-0241 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (at the office of the Corporate Trustee): (800) 985-0794 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: UNITS OF BENEFICIAL INTEREST Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of Units of Beneficial Interest held by non-affiliates of the registrant at August 14, 1998: $25,716,167. Number of Units of Beneficial Interest outstanding as of the close of the period covered by this report: June 30, 1998 -- 2,000,000 Units. Documents Incorporated by Reference: NONE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CROSS-REFERENCE SHEET This Form 10-K for the year ended June 30, 1998 of Marine Petroleum Trust is not organized by conventional item numbers and headings contemplated by SEC rules and forms. This cross-reference page is intended to indicate to the reader where (or under which headings) information required under Form 10-K may be found herein.
FORM 10-K HEADINGS ITEM NUMBERS HEREIN - ------------ -------- PART I...................................................... General Item 1. Business........................................ The Trust; Properties Item 2. Properties...................................... Properties Item 3. Legal Proceedings............................... Legal Matters Item 4. Submission of Matters to a Vote of Security Holders....................................... Unitholder Voting Matters PART II..................................................... Financial Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................... Market and Investor Information Item 6. Selected Financial Data......................... Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and Supplementary Data..... Financial Statements and Supplementary Data Item 9. Disagreements on Accounting and Financial Disclosure.................................... Accounting Matters PART III.................................................... Management and Principal Unitholders Item 10. Directors and Executive Officers of the Registrant.................................... Administrators Item 11. Management Remuneration......................... Administrators; Management Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management................................ Principal Unitholders Item 13. Certain Relationships and Related Transactions.................................. Administrators; Management Compensation PART IV..................................................... Miscellaneous Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... Exhibits, Financial Statement Schedules and Reports on Form 8-K
3 GENERAL THE TRUST Organization. Marine Petroleum Trust ("Marine") is a royalty trust created in 1956 under the laws of the State of Texas. Marine is not permitted to engage in any business activity inasmuch as 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 gas leases in the Gulf of Mexico, pursuant to license agreements and amendments thereto between Marine's predecessors and Gulf Oil Corporation ("Gulf"). As a result of various transactions that have occurred since 1956, the Gulf interests now are held by Chevron Corporation ("Chevron"), Elf Acquitane, Inc. ("Elf"), and their assignees. The indenture pursuant to which Marine was created (the "Indenture"), provides that the corporate trustee is to distribute all cash in Marine, less an amount reserved for the payment of accrued liabilities and estimated future expenses, to unitholders of record on the 28th day of September, December, March and June of each fiscal year. If the 28th falls on a Saturday, Sunday or legal holiday, the distribution is payable on the immediately preceding business day. The Indenture also provides that the term of the royalty trust created thereby will expire on June 1, 2001 unless extended by the vote of the holders of a majority of the outstanding units of beneficial interest. See "Unitholder Voting Matters." Marine's wholly-owned subsidiary, Marine Petroleum Corporation ("MPC"), holds title to interests in properties subject to Marine's interests that are situated offshore of Louisiana. Ninety-eight percent of all oil, gas, and other mineral royalties collected by this subsidiary are paid to Marine. MPC, like Marine, is prohibited from engaging in a trade or business and does only those things 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 gas industry, and are sometimes referred to herein as such. All production and marketing functions are conducted by the working interest owners of the leases. Revenues from the overriding royalties are paid to Marine either (i) on the basis of the selling price of oil, gas and other minerals produced, saved and 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 contracts creating these interests were entered into between predecessors of Marine and Gulf, and relate to two different types of interests. One type of interest is an overriding royalty interest equal to three-fourths of 1% of the value at the well of any oil, gas, or other minerals produced and sold. Marine's overriding royalty interest applies only to existing leases and does not apply to new leases. The second interest is Marine's 32.6% equity interest in Tidelands Royalty Trust "B" ("Tidelands"), a separate Texas trust, which owns similar interests in any oil, gas, or other mineral lease acquired by Gulf and/or its transferees and assignees in a 1,370,000-acre area (divided into 60 tracts) of the Gulf of Mexico during a 50-year period ending April 30, 2001. Tidelands' interest in each tract consists of (i) a production payment, which reverts to an overriding royalty, on oil and gas and (ii) an overriding royalty on other minerals. The production payment is payable out of 12.5% of the value at the well of oil and gas produced and sold from leases on a subject tract until Tidelands has earned $1,500,000 on such tract. The production payment then reverts to an overriding royalty interest equal to approximately 4.17% of the value at the well of oil and gas sold from the tract. Tidelands' overriding royalty interest on minerals other than oil and gas is payable at the rate of 4.17% of the value of such minerals sold from the property. Marine, through its ownership of units of beneficial interest in Tidelands, derives a 32.6% interest in the production payments and overriding royalties of Tidelands. Presently, the leases subject to Marine's interests cover 281,976 gross acres (including Tidelands' interest in 31,375 leased acres). These leases will remain in force until the expiration of their respective terms. Leases may be voluntarily released by the working interest owner after all oil and gas reserves are produced. They may also be abandoned by the working interest owner due to failure to discover sufficient reserves to make development economically worthwhile. In addition, the federal government may force termination if the working interest owner fails to fully develop a lease once it is acquired. 4 For the year ended June 30, 1998, approximately 37% of Marine's royalty revenues were attributable to the sale of oil and approximately 63% were attributable to the sale of natural gas. The royalty revenues received by Marine are affected by seasonal fluctuations in demand. Royalty revenue received by Marine from Chevron and from Pennzoil Exploration and Production Company ("Pennzoil") accounted in the aggregate for approximately 85%, 81% and 88% of Marine's royalty revenue for the years ended June 30, 1998, 1997 and 1996, respectively. In addition, Marine's revenue from its equity interest in Tidelands accounted for approximately 15%, 8% and 12% of Marine's revenue for the years ended June 30, 1998, 1997 and 1996, respectively. Tidelands has reported that royalty revenues from Burlington Resources, Chevron and Pennzoil accounted for a substantial portion of Tidelands' royalty revenue for the years ended December 31, 1997, 1996 and 1995. Marine derives no revenues from foreign sources and has no export sales. Trust Functions. Marine is administered by officers and employees of its Trustee, NationsBank, N.A. MPC employs one individual (its president, treasurer and director) to perform certain management, financial and administrative services for Marine. Except for this individual, all officers and directors of MPC serve without compensation. See "Management and Principal Unitholders." MPC leases office space in Dallas, Texas to provide work space and record storage for Marine, MPC, Tidelands and Tidelands' wholly-owned subsidiary corporation, Tidelands Royalty "B" Corporation. The cost of this office facility is shared by all four of these entities in proportion to each entity's gross income to the total of such income of all entities. The ability of Marine to receive revenues is entirely dependent upon its entitlement to its rights with respect to the leases held by Chevron and its assignees in the Gulf of Mexico (as more fully described in "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 mcf of natural gas produced. No funds are reinvested by Marine; thus, these depleting assets are not being replaced. PROPERTIES General. Marine is not engaged in oil and gas operations, although its income is based upon such operations of others. Marine's income is derived from contracts that provide for payments in the nature of overriding royalties made to Marine based on oil and gas sales from certain leases in the Gulf of Mexico. Reserves. Marine is not engaged in the production of crude oil or natural gas. Its income is derived from overriding royalty payments which are carved out of working interests in oil and gas leases in the Gulf of Mexico. Marine does not have the engineering data necessary to make an estimate of proved oil and gas reserves (nor the present value of future net cash flows from such reserves), and is not entitled to receive such data from the owners of the working interests from which Marine's interest is derived. See also "Difficulty in Obtaining Certain Data" below. Since Marine does not have access to this reserve information, Marine is unable to compute the standardized measure of discounted future net cash flows therefrom. Marine did not file any reports during the fiscal year ended June 30, 1998 with any federal authority or agency with respect to oil and gas reserves. 2 5 Production. Information regarding the net quantities of oil and gas produced with respect to Marine's interests (including its equity in Tidelands) for each of the last three fiscal years as well as the average sales price per unit of oil and gas produced, upon which payments to Marine are based, is set forth in the following table:
YEAR ENDED JUNE 30, ----------------------------- 1998 1997 1996 ------- ------- ------- Quantity Oil (in barrels ("bbls"))........................... 62,588 74,556 79,536 Gas (in thousand cubic feet ("mcf"))................ 754,143 997,454 876,055 Average Price Oil (per bbl.)...................................... $15.72 $21.31 $17.76 Gas (per mcf)....................................... $2.74 $2.39 $2.08
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 crude oil sales prices, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" below. Productive Wells. Based on the latest information available to Marine and including its equity interest in Tidelands, there were approximately 306 wells subject to Marine's interests actually producing at some time in calendar 1997, some of which contained multiple completions. During calendar 1997, approximately 134 wells produced oil and approximately 172 wells produced gas. Most of the oil wells also produced associated gas and most of the gas wells produced condensate, which is economically the equivalent of oil. See "Difficulty in Obtaining Certain Data" below. Drilling Activity. Information concerning wells drilled and completed in which Marine had an interest (including its equity interest in Tidelands) for each of its last three fiscal years is set forth below: WELLS COMPLETED
YEAR ENDED JUNE 30, -------------------- 1998 1997 1996 ---- ---- ---- Development Oil....................................................... 7 1 2 Gas....................................................... 8 6 5 Suspended*................................................ 13 18 18 Dry....................................................... 7 4 3 -- -- -- Totals............................................... 35 29 28 == == ==
- --------------- * "Suspended" wells are completed wells the classification of which had not been reported at the relevant date. Information regarding net wells or acres is not included since Marine does not own any working interests. Lease Acreage. Marine has an overriding royalty interest (including by virtue of its equity interest in Tidelands) in 74 different oil and gas leases covering 281,976 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 has been classified according to its current stage of development and is presented in the following table:
ACREAGE CLASSIFICATION --------------------------------------------- LEASES GRANTED BY: PRODUCING DEVELOPMENTAL(1) EXPLORATORY(2) ------------------ --------- ---------------- -------------- United States.................................. 276,446 0 8,231 State of Texas................................. 640 0 0 State of Louisiana............................. 4,890 0 0 ------- -- ----- 281,976 0 8,231 ======= == =====
3 6 - --------------- (1) By definition, "Developmental Acreage" may be expected to produce royalty income at some point in the future. (2) Leases are typically granted for a term of five years, during which the lease owner must establish a commercial production capability, or the lease expires. No commercial production has been established on the acreage classified above by Marine under the column heading "Exploratory." By definition, this acreage includes undrilled wildcat acreage as well as some possible discoveries which are awaiting further testing. The 8,231 acres are located on leases that have commercial production, but the production is not on Marine's overriding royalty area within those leases. The overriding royalty interest owned by Marine is a fractional interest out of total oil and gas sold, and is free and clear of all operating costs. The actual percentage interest in a lease attributable to Marine's interest varies from lease to lease. The acreage weighted average percentage interest attributable to Marine's interest in all of these leases is .5905%. Present Activities. Published reports indicate that 9 wells are being drilled on tracts in which Marine has an interest. Marine also understands from published reports that plans are being made to begin drilling on 8 additional wells. The U.S. Department of the Interior conducted a lease sale for the Gulf of Mexico in April and August, 1998. Chevron did not bid on any tracts included in this sale that are located in the 1,370,000 acre area subject to the Tidelands contract (in which Marine has a 32.6% equity interest.) Difficulty in Obtaining Certain Data. Marine's only activities are the collection and distribution of revenues from overriding royalties on certain oil and gas leases in the Gulf of Mexico, pursuant to purchase agreements between Marine's predecessors and Gulf and its transferees. The leasehold working interests which are subject to the rights held by Marine are owned, in most cases, in whole or in part by Chevron, or other oil and gas exploration and production companies. Certain information as to reserves, availability of oil and gas, average production cost (lifting cost) per unit, undeveloped acreage, net wells and net acres, etc., with respect to the particular leases subject to Marine's interests lies solely within the knowledge of these concerns. Engineering data, if any, regarding these leaseholds would have been compiled principally by or for the working interest owners of these leaseholds and Marine believes that it will not be provided access to such information. Because of this, it appears that unreasonable efforts and expense would be involved in seeking to obtain all of the information required under Item 102 of Regulation S-K and Securities Exchange Act of 1934 Industry Guide 2. LEGAL MATTERS Neither Marine nor MPC, nor any of their respective properties (exclusive of properties owned by Chevron and subject to the Marine and Tidelands license agreements), is a party to or subject to any material pending litigation as of the date hereof. UNITHOLDER VOTING MATTERS No matter was submitted by Marine during the year ended June 30, 1998 to a vote of unitholders, whether through the solicitation of proxies or otherwise. Unitholders owning ten percent (10%) or more of the outstanding units may at any time direct the Trustee to conduct an investigation to determine whether the Trustee is receiving all revenues properly accruing to Marine's trust estate. The Trustee may be removed by unitholders owning a majority of the outstanding units. The unitholders owning eighty percent (80%) of the outstanding units may amend and modify the Trust Indenture or any contract, agreement or undertaking which constitutes a part of the trust estate, but no such amendment may change the nature of the trust from that of a purely ministerial trust, nor can there be any change in the rights or responsibilities of the Trustee without its consent. However, no such change shall be made with respect to any amendment to the Indenture if the Trustee shall receive written 4 7 objection from any unitholder within 20 days from the date of mailing to the unitholders of the first notice of the proposed consent. Each unitholder has the right to examine, inspect and audit all records relating to the trust estate. Marine is to continue until June 1, 2001, or until such later date as holders of the units owning a majority of the outstanding units may designate, but in any event, not more than 20 years from such designation. Alternatively, instead of so extending the term of Marine, the holders of the units owning a majority of the outstanding units may direct the Trustee to create one or more corporations to receive and hold the trust estate, or any portion thereof, unless the Trustee shall have received written objection from any unitholder within 20 days from the date of mailing to the unitholders of the first notice of the proposed consent. However, the unitholders owning eighty percent (80%) of the outstanding units may terminate the trust on any date, whether earlier or later than any such date determined as above, as they may specify. Upon termination of the trust (other than by the transfer of all the trust estate to a corporation pursuant to the provisions of the Indenture, as described above), the Trustee, after paying all of the obligations of the trust, shall transfer to an agent appointed by the holders of the units owning a majority of the outstanding units, by recordable assignments but without warranty, the interests in the trust estate. Prior to termination of the trust, no unitholder shall have any legal title in or to any of the properties comprising the trust estate nor the right to secure any partition thereof. FINANCIAL MARKET AND INVESTOR INFORMATION The units of beneficial interest in Marine trade on the Nasdaq SmallCap Market under the symbol MARPS. Distributions of cash are made to unitholders quarterly. The following table presents the range of high and low trade prices by quarter for the past two years as reported by Nasdaq Online. The per unit amount of cash distributed to unitholders for each of these quarters is also presented in the table.
TRADE PRICE ------------------ DISTRIBUTIONS QUARTER ENDING HIGH LOW PER UNIT -------------- ------- ------- ------------- September 30, 1996.................................. 14.000 10.250 .496 December 31, 1996................................... 16.250 12.750 .490 March 31, 1997...................................... 17.500 14.750 .520 June 30, 1997....................................... 18.000 14.000 .464 September 30, 1997.................................. 21.125 15.250 .437 December 31, 1997................................... 20.625 16.500 .351 March 31, 1998...................................... 18.500 17.000 .511 June 30, 1998....................................... 19.500 17.250 .310
Marine is authorized to issue and has issued 2,000,000 units of beneficial interest. On March 9, 1998, these outstanding units were held of record by 798 unitholders. During the first half of 1998, Marine received notice from The Nasdaq SmallCap Market that Marine's units of beneficial interest would be delisted because Marine did not satisfy Nasdaq's audit committee requirement. Marine believes that its failure to satisfy this requirement is due to Marine's organizational structure as a trust, which is managed by a trustee rather than by a board of directors. On July 30, 1998, Marine appealed this determination in an oral presentation to a Nasdaq hearing board. Representatives of the The Nasdaq SmallCap Market advised Marine that the units of beneficial interest would not be delisted and such units have continued to trade on The Nasdaq SmallCap Market. Marine has not yet received a final written determination from the appeal board, but believes that there will be no change in the status of trading in the units of beneficial interest. 5 8 SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS) ---------------------------------------------- 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ STATEMENT OF INCOME AND UNDISTRIBUTED INCOME SELECTED DATA Income: Oil and gas royalties.................... $2,577 $3,645 $2,842 $1,857 $2,044 Equity in Tidelands...................... 461 319 385 320 1,156 Interest................................. 100 101 92 83 51 ------ ------ ------ ------ ------ $3,138 $4,065 $3,319 $2,260 $3,251 ------ ------ ------ ------ ------ Expenses: Taxes other than income.................. $ 0 $ 0 $ 0 $ 0 $ 1 General and administrative............... 146 143 121 118 106 Federal income taxes..................... 12 8 12 6 3 ------ ------ ------ ------ ------ $ 158 $ 151 $ 133 $ 124 $ 110 ------ ------ ------ ------ ------ Net income............................... $2,980 $3,914 $3,186 $2,136 $3,141 ====== ====== ====== ====== ====== Distributions............................ $3,216 $3,939 $2,548 $2,287 $3,329 ====== ====== ====== ====== ====== Per Unit (2,000,000 outstanding) Net income............................... $ 1.49 $ 1.96 $ 1.59 $ 1.07 $ 1.57 ====== ====== ====== ====== ====== Distributions............................ $ 1.61 $ 1.97 $ 1.27 $ 1.14 $ 1.66 ====== ====== ====== ====== ====== BALANCE SHEET SELECTED DATA Total assets................................ $2,745 $2,945 $2,979 $2,338 $2,489 ====== ====== ====== ====== ====== Trust equity................................ $1,809 $2,045 $2,070 $1,432 $1,583 ====== ====== ====== ====== ======
6 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity. Because of the nature of Marine as a trust entity, there is no requirement for capital; its only obligation is to distribute to unitholders the net income actually collected. As an administrator of oil and gas royalty properties, Marine collects income monthly, pays expenses of administration, and disburses all net income collected to its unitholders each quarter. Marine's Indenture (and the charter and by-laws of MPC) expressly prohibits the operation of any kind of trade or business. Marine's oil and gas properties are depleting assets and are not being replaced due to the prohibition against these investments. These restrictions, along with other factors, allow Marine to be treated as a grantor trust; thus all income and deductions, for tax purposes, should flow through to each individual unitholder. Marine is not a taxable entity. Results of Operations. Marine's income consists primarily of oil and gas royalties and is based on the value at the well of its percentage interest in oil and gas sold without reduction for any of the expense of production. Value at the well for oil is the purchasers' posted price at its receiving point onshore, less the cost of transportation from the offshore lease to the onshore receiving point. In general, value at the well is determined on the basis of the selling price of oil, gas and other minerals produced, saved and sold, or at wellhead prices determined by industry standards, where the selling price does not reflect value at the well. Summary Review. Marine's net income for the year ended June 30, 1998 amounted to $2,980,458 ($1.49 per unit) as compared to $3,914,197 ($1.96 per unit) in the previous year. The 24% decrease resulted from a combination of lower oil and gas production and lower prices for oil. Oil production was down approximately 16% and gas production was down approximately 24%. The average price received for oil dropped from $21.31 in fiscal 1997 to $15.72 in the current fiscal year. The average price for gas increased to $2.74 in the current fiscal year from $2.39 realized in fiscal 1997. Income from Marine's equity interest in Tidelands amounted to $461,095 in the current fiscal year and in the previous year it was $319,251. Income from Tidelands contributed approximately 15% of Marine's net income for the current year. New gas production added in the third quarter of 1997 increased Tidelands' income. Marine owns 452,366 units of beneficial interest in Tidelands (32.6294%). During the current year the working interest owners on leases in which Marine has an interest have drilled 35 new wells, consisting of seven oil wells, eight gas wells, 13 wells on which operations were suspended and seven dry holes. Available information indicates that the suspended wells will produce either oil or gas. All of the wells were located in areas offshore from the State of Louisiana. In addition to the 35 wells mentioned above, 24 wells were recompleted to produce in different formations. The most recent data regarding producing wells available to Marine covers production for the calendar year 1997. In that year there were 134 oil wells and 172 gas wells producing at some time during the year on leases in which Marine has an interest. A number of the wells (approximately 38%) were first brought on stream prior to 1990. However, approximately 81% of the oil and approximately 70% of the gas produced in 1997 was from wells that are from one to five years old. 7 10 The following table shows the royalty income, the net quantities sold, and the average price received for oil and gas during the past three years (including Marine's equity interest in Tidelands):
FOR YEARS ENDED JUNE 30 ------------------------------------ 1998 1997 1996 ---------- ---------- ---------- Income from Oil royalties.................................. $ 983,978 $1,588,476 $1,412,750 Gas royalties.................................. 2,068,912 2,379,437 1,819,807 ---------- ---------- ---------- Totals................................. $3,052,890 $3,967,913 $3,232,557 ---------- ---------- ---------- Net quantities sold Oil (bbls)..................................... 62,588 74,556 79,536 Gas (mcf)...................................... 754,143 997,454 876,055 Average price Oil............................................ $15.72 $21.31 $17.76 Gas............................................ 2.74 2.39 2.08
Marine's revenues are derived from the oil and gas production activities of unrelated parties. Marine's revenues and distributions fluctuate from period to period based upon factors beyond Marine's control, including without limitation the number of leases bid on and obtained by parties subject to Marine's interests, the number of productive wells drilled on leases subject to Marine's interests, the level of production over time from such wells and the prices at which the oil and gas from such wells is sold. Marine believes that it will continue to have revenues sufficient to permit distributions to be made to unitholders for the foreseeable future, although no assurance can be made regarding the amounts thereof. The foregoing sentence is a forward-looking statement. Factors that might cause actual results to differ from expected results include reductions in prices or demand for oil and gas, which might then lead to decreased production; reductions in production due to depletion of existing wells or disruptions in service, including as the result of storm damage, blowouts or other production accidents, and geological changes such as cratering of productive formations; expiration or release of leases subject to Marine's interests; and the discontinuation by parties subject to Marine's interests of their efforts to obtain leases in the Royalty Area. Marine's business consists solely of the collection of royalty payments, the payment of expenses and the distribution of remaining amounts to unitholders. Marine (through its subsidiary, Marine Petroleum Corporation) owns only one personal computer, which is used by Marine for certain accounting and general business functions. Marine believes that the computer and the software used thereon are Year 2000 compliant. Marine also believes that Marine does not own or lease any other assets containing imbedded computer chips, the failure of which would have a material adverse effect on Marine. Important aspects of Marine's operations are conducted by third parties. These include the production and sale of oil and gas and the calculation and payment of royalty payments to Marine, which are conducted by oil and gas companies that lease tracts subject to Marine's interests. Similarly, Marine's distributions are processed and paid by The Bank of New York as the agent for the trustee of Marine. Any disruption of Marine's operations that results from Year 2000 problems of these third parties could have a material adverse effect on Marine. Marine does not have access to information that would permit Marine to determine the status of these third parties' efforts to analyze and address Year 2000 issues. Marine intends to monitor these parties' public announcements and disclosure regarding Year 2000 issues, and to seek direct assurances where appropriate, in an effort to ensure that these parties address Year 2000 issues that could adversely affect Marine. Marine's subsidiary, Marine Petroleum Corporation, has provided an account payable of $758,250 to cover possible refunds that may be required upon redetermination of gas prices for royalty payments in prior periods. During the most recent fiscal year, Marine Petroleum Corporation determined that $137,474 of the previously-established account payable for possible royalty overpayments no longer was required. Accordingly, during the most recent fiscal year, Marine Petroleum Corporation reduced accounts payable, and increased net income by such amount. 8 11 During the most recent fiscal year, Chevron requested repayment for certain royalties that Chevron believes Chevron incorrectly paid to Marine Petroleum Corporation during 1995, 1996 and 1997. Marine Petroleum Corporation established a reserve of $167,000 to cover this potential liability. In August of 1998, Marine Petroleum Corporation repaid $157,000 to Chevron. Oil and Gas Royalties -- 1998 and 1997: During fiscal 1998, Marine received approximately 37% of its royalty income from the sale of oil and 63% from the sale of natural gas. Income from such oil and gas royalties in fiscal 1998 decreased approximately 29% from fiscal 1997. Oil royalties, exclusive of Marine's interest in Tidelands, during fiscal 1998 ($947,656) were 39% less than oil royalties received in fiscal 1997 ($1,544,131), due to a decrease in the quantity of oil sold and a decrease in the average price received for oil sold. Natural gas royalties, exclusive of Marine's interest in Tidelands, during fiscal 1998 ($1,629,470) were 22% lower than natural gas royalties received in fiscal 1997 ($2,100,873). The decrease was due to the combination of a decrease in the quantity of natural gas sold and an increase in the price received. Interest Income -- 1997 and 1998. Marine's interest income during fiscal 1998 decreased to $99,915 from the $100,705 earned in fiscal 1997, due primarily to a decrease in funds invested. Equity in Tidelands -- 1997 and 1998. Marine realized income of $461,095 during fiscal 1998 from its interest in Tidelands, an increase of 44% from the $319,251 earned in fiscal 1997. Oil and Gas Royalties -- 1996 and 1997: During fiscal 1997, Marine received, exclusive of its interest in Tidelands, 42% of its royalty income from the sale of oil and 58% from the sale of natural gas. Income from such oil and gas royalties in fiscal 1997 increased 28% from fiscal 1996. Oil royalties, exclusive of Marine's interest in Tidelands, during fiscal 1997 ($1,544,131) were 12% more than oil royalties received in fiscal 1996 ($1,375,880). Natural gas royalties, exclusive of Marine's interest in Tidelands, during fiscal 1997 ($2,100,873) were 43% more than natural gas royalties received in fiscal 1996 ($1,465,668). Interest Income -- 1996 and 1997. Marine's interest income increased 9% during fiscal 1997 to $100,705 from the $92,275 earned in fiscal 1996, due primarily to an increase in invested funds held for distribution. Equity in Tidelands -- 1996 and 1997. Marine owns beneficially 32.6% of the outstanding units of beneficial interest in Tidelands. In fiscal 1997, Marine realized income of $319,251 from its interest in Tidelands, a decrease of 17% from the $384,753 earned in fiscal 1996. Pursuant to Tidelands' agreement with Chevron (as successor to Gulf's interests), should Chevron acquire a lease or leases on any specified tracts in the Gulf of Mexico before April 30, 2001, and oil or gas is produced or sold, Chevron will make production payments to Tidelands in an amount equal to 12.5% of the value of the oil and gas sold until the sum of $1,500,000 has been paid on the tract. Thereafter, Tidelands' interest will be converted to an overriding royalty and such payments will equal 4.17% of the value of the oil and gas sold as long as the lease exists. 9 12 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements listed in the following Index, together with the related notes and the report of KPMG Peat Marwick LLP, independent certified public accountants, are presented on pages 11 through 18 hereof.
PAGE ---- Independent Auditors' Report................................ 12 Financial Statements: Consolidated Balance Sheets as of June 30, 1998 and 1997................................................... 13 Consolidated Statements of Income and Undistributed Income for the Three Years Ended June 30, 1998................ 14 Consolidated Statements of Cash Flows for the Three Years Ended June 30, 1998.................... 15 Notes to Consolidated Financial Statements................ 16
See also "Exhibits, Financial Statement Schedules and Reports on Form 8-K" of this Form 10-K for further information concerning the financial statements of Marine and its subsidiaries. All schedules have been omitted for the reason that they are either not required, not applicable or the required information is included in the financial statements and notes thereto. ACCOUNTING MATTERS During fiscal 1998 and 1997, there have been no disagreements between Marine and its independent auditors on accounting or financial disclosure matters which would warrant disclosure under Item 304 of Regulation S-K. MANAGEMENT AND PRINCIPAL UNITHOLDERS ADMINISTRATORS Marine is a trust created under the laws of the State of Texas. Marine's Indenture does not provide for directors or officers or the election of directors or officers. Under the Indenture, NationsBank of Texas, N.A., serves as Trustee. R. Ray Bell may be considered a significant employee of Marine. Mr. Bell has been involved in the administration of Marine since its inception. He was the chief financial officer of Marine's predecessor and is a certified public accountant. Mr. Bell, 71 years old, is a graduate of Midwestern State University of Wichita Falls, Texas with a Bachelor of Science degree in business administration and economics. Since July 1, 1977, he has served as an officer and director of MPC, and will continue to serve in such capacities until the next meeting of directors and shareholders, respectively, of MPC or until his successors are elected and qualified. 10 13 MANAGEMENT COMPENSATION During the fiscal year ended June 30, 1998, Marine paid or accrued fees of $14,126 to NationsBank of Texas, N.A., as Trustee. These fees were paid in accordance with the terms of the Trust Indenture, as amended, governing Marine. PRINCIPAL UNITHOLDERS The following table sets forth the persons known to Marine who own beneficially more than five percent of the outstanding units of beneficial interest as of June 30, 1998:
AMOUNT AND NATURE OF PERCENT TITLE OF CLASS NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS -------------- ---------------- -------------------- -------- Units of Beneficial L. C. Paslay 286,469 units, 14.32% Interest 1020 S. Ocean Blvd. owned Manalapan, FL 33462 of record and beneficially*
- --------------- * Does not include 27,225 units held in trust in the name of L. C. Paslay, as Co-Trustee with NationsBank of Texas, N.A., for the benefit of Patricia L. Martin, daughter of Mr. Paslay. There are no executive officers or directors of Marine. NationsBank of Texas, N.A. does not beneficially own any units of beneficial interest. MISCELLANEOUS EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements -- see "Financial Statements and Supplementary Data" above. The consolidated financial statements, together with the related notes and the report of KPMG Peat Marwick LLP, independent certified public accountants, as contained in the Form 10-K of Tidelands Royalty Trust "B" for its fiscal year ended December 31, 1997 and filed with the Securities and Exchange Commission, are hereby incorporated herein by reference for all purposes. (b) Reports on Form 8-K -- No reports on Form 8-K have been filed during the last quarter of the fiscal year ended June 30, 1998. (c) Exhibits: (3) -- Indenture, as amended, of Marine, filed as Exhibit 3 to the Annual Report on Form 10-K of Marine Petroleum Trust for the fiscal year ended June 30, 1994, filed with the Securities and Exchange Commission and incorporated by reference herein. (4) -- Form of Certificate evidencing Unit(s) of Beneficial Interest, filed as Exhibit 4 to the Annual Report on Form 10-K of Marine Petroleum Trust for the fiscal year ended June 30, 1994, filed with the Securities and Exchange Commission and incorporated by reference herein. (21) -- Subsidiaries of Marine. (27) -- Financial Data Schedule.
11 14 INDEPENDENT AUDITORS' REPORT The Trustee Marine Petroleum Trust: We have audited the accompanying consolidated balance sheets of Marine Petroleum Trust and subsidiary as of June 30, 1998 and 1997 and the related consolidated statements of income and undistributed income and cash flows for each of the years in the three-year period ended June 30, 1998. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Marine Petroleum Trust and subsidiary as of June 30, 1998 and 1997 and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1998, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Dallas, Texas August 12, 1998 12 15 MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 AND 1997 ASSETS
1998 1997 ---------- ---------- Current assets: Cash and cash equivalents................................. $1,922,336 $1,759,718 Oil and gas royalties receivable.......................... 399,007 835,230 Receivables from affiliate (note 2)....................... 116,377 64,580 ---------- ---------- Total current assets.............................. 2,437,720 2,659,528 ---------- ---------- Investment in affiliate (note 2)............................ 306,670 285,478 Office equipment, at cost less accumulated depreciation of $21,351 in 1998 and $19,415 in 1997.................... 555 272 Producing oil and gas properties............................ 7 7 ---------- ---------- $2,744,952 $2,945,285 ========== ========== LIABILITIES AND TRUST EQUITY Current liabilities: Accounts payable (note 3)................................. $ 926,663 $ 895,724 Income taxes payable...................................... 9,021 4,758 ---------- ---------- Total liabilities................................. 935,684 900,482 ---------- ---------- Trust equity: Corpus -- authorized 2,000,000 units of beneficial interest, issued 2,000,000 units at nominal value...... 8 8 Undistributed income...................................... 1,809,260 2,044,795 ---------- ---------- Total trust equity................................ 1,809,268 2,044,803 ---------- ---------- $2,744,952 $2,945,285 ========== ==========
See accompanying notes to consolidated financial statements. 13 16 MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME AND UNDISTRIBUTED INCOME THREE YEARS ENDED JUNE 30, 1998
1998 1997 1996 ---------- ---------- ---------- Income: Oil and gas royalties................................ $2,577,126 $3,645,004 $2,841,549 Equity in earnings of affiliate (note 2)............. 461,095 319,251 384,753 Interest income...................................... 99,915 100,705 92,275 ---------- ---------- ---------- 3,138,136 4,064,960 3,318,577 ---------- ---------- ---------- Expenses: Taxes other than income.............................. 63 282 276 General and administrative........................... 146,303 142,781 120,549 ---------- ---------- ---------- 146,366 143,063 120,825 ---------- ---------- ---------- Income before federal income taxes........... 2,991,770 3,921,897 3,197,752 Federal income taxes of subsidiary..................... 11,312 7,700 11,900 ---------- ---------- ---------- Net income................................... 2,980,458 3,914,197 3,185,852 Undistributed income at beginning of year.............. 2,044,795 2,069,945 1,431,862 ---------- ---------- ---------- 5,025,253 5,984,142 4,617,714 Distributions to unitholders........................... 3,215,993 3,939,347 2,547,769 ---------- ---------- ---------- Undistributed income at end of year.................... $1,809,260 $2,044,795 $2,069,945 ========== ========== ========== Net income per unit.................................... $ 1.49 $ 1.96 $ 1.59 ========== ========== ========== Distributions per unit................................. $ 1.61 $ 1.97 $ 1.27 ========== ========== ==========
See accompanying notes to consolidated financial statements. 14 17 MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS THREE YEARS ENDED JUNE 30, 1998
1998 1997 1996 ----------- ----------- ----------- Cash flows from operating activities: Net income........................................ $ 2,980,458 $ 3,914,197 $ 3,185,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation................................... 1,936 699 701 Equity in undistributed earnings of affiliate.................................... (21,192) (18,996) (67,256) Change in assets and liabilities: Oil and gas royalties receivable............. 436,223 (247,305) (200,465) Receivables from affiliate................... (51,797) 38,146 (13,955) Accounts payable............................. 30,939 -- -- Employment tax payable....................... -- (2,459) (1,377) Income taxes payable......................... 4,263 (5,912) 3,652 ----------- ----------- ----------- Net cash provided by operating activities........................... 3,380,830 3,678,370 2,907,152 Cash flows used in investing activities -- purchase of office equipment............................... (2,219) -- -- Cash flows used in financing activities -- distributions to unitholders........ (3,215,993) (3,939,347) (2,547,769) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents....................................... 162,618 (260,977) 359,383 Cash and cash equivalents at beginning of year...... 1,759,718 2,020,695 1,661,312 ----------- ----------- ----------- Cash and cash equivalents at end of year............ $ 1,922,336 $ 1,759,718 $ 2,020,695 =========== =========== ===========
See accompanying notes to consolidated financial statements. 15 18 MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED JUNE 30, 1998 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General The Marine Petroleum Trust ("Trust") was established on June 1, 1956 with the transfer of property to the Trust consisting of certain contract rights, units of beneficial interest and common stock in exchange for units of beneficial interest in the Trust. The contract rights entitled the Trust to receive a .0075 overriding royalty interest in oil, gas and other mineral leasehold interests acquired by Gulf Oil Corporation, now Chevron U.S.A., Inc. ("Chevron"), a subsidiary of Chevron Corporation, in certain areas of the Gulf of Mexico prior to January 1, 1980. Substantially all royalty revenue is received from Chevron. The Trust must distribute all income, after paying its liabilities and obligations, to the unitholders during the months of March, June, September and December each year. It cannot invest any of its money for any purpose and cannot engage in a trade or business. A Louisiana trust can only exist for a short period of time; therefore, the unitholders assigned their contract rights off-shore of Louisiana to Marine Petroleum Corporation reserving a 98% net profits interest to themselves. The net profits interest contract was transferred to the Trust along with the other properties. The Trust is authorized to pay expenses of the Corporation should it be necessary. The Trust is to continue until June 1, 2001, or until such later date as holders of the units owning a majority of the outstanding units may designate, but in any event, not more than 20 years from such designation. Alternatively, instead of so extending the term of the Trust, the holders of the units owning a majority of the outstanding units may direct the Trustee to create one or more corporations to receive and hold the trust estate, or any portion thereof, unless the Trustee shall have received written objection from any unitholder within 20 days from the date of mailing to the unitholders of the first notice of the proposed consent. However, the unitholders owning eighty percent (80%) of the outstanding units may terminate the trust on any date. (b) Principles of Consolidation The consolidated financial statements include the Trust and its wholly-owned subsidiary, Marine Petroleum Corporation. All material intercompany accounts and transactions have been eliminated in consolidation. (c) Producing Oil and Gas Properties At the time the Trust was established, no determinable market value was available for the assets transferred to the Trust; consequently, nominal values were assigned. Accordingly, no allowance for depletion has been computed. All income from oil and gas royalties relate to proved developed oil and gas reserves. (d) Undistributed Income The Trust indenture agreement 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 28th day of March, June, September and December of each year. If the 28th falls on a Saturday, Sunday or legal holiday, the distribution is payable on the immediately preceding business day. Undistributed income includes $743,519 and $682,033 applicable to the subsidiary corporation at June 30, 1998 and 1997, respectively. 16 19 MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE YEARS ENDED JUNE 30, 1998 (e) Federal Income Taxes No provision has been made for Federal income taxes on the Trust's income since such taxes are the liability of the unitholders. Federal income taxes have been provided on the income of the subsidiary corporation, excluding the 98% net profits interest to be distributed to the Trust and deducting statutory depletion. (f) Credit Risk Concentration and Cash Equivalents Financial instruments which potentially subject the Trust and its wholly-owned subsidiary to concentrations of credit risk are primarily investments in cash equivalents and receivables. The Trust and its wholly-owned subsidiary place their cash investments with financial institutions or companies that management considers credit worthy and limit the amount of credit exposure from any one financial institution or company. The Trust has not experienced significant problems collecting its receivables in the past. The Trust and its wholly-owned subsidiary had cash equivalents of $1,885,861 and $1,726,851 at June 30, 1998 and 1997, respectively, which consisted of money market accounts and money market mutual funds. For purposes of the statements of cash flows, the Trust considers all investments with initial maturities of three months or less to be cash equivalents. (g) Statements of Cash Flows The Trust's wholly-owned subsidiary made Federal income tax payments of $7,049, $13,792, and $8,248 during the years ended June 30, 1998, 1997 and 1996, respectively. (h) Fair Value of Financial Instruments The Trust and its wholly owned subsidiary define the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying value of cash and cash equivalents, oil and gas royalties receivable, receivables from affiliates, accounts payable, and taxes payable approximate fair value because of the short maturities of those instruments. (i) Use of Estimates Management of the Trust and its wholly-owned subsidiary has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (j) Income Per Unit The Trust adopted the provisions of SFAS No. 128, "Earnings per Share" during 1998. Adoption of this standard did not have a material effect on the calculation of income per unit. Income per unit is calculated by dividing net income by the weighted average number of units of beneficial interest outstanding during the period. (k) Significant Royalty Sources Royalty revenue received by Marine from Chevron and from Pennzoil Exploration and Production Company ("Pennzoil") accounted in the aggregate for approximately 85%, 81% and 88% of Marine's royalty revenue for the years ended June 30, 1998, 1997 and 1996, respectively. 17 20 MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE YEARS ENDED JUNE 30, 1998 (2) INVESTMENT IN AND RECEIVABLES FROM AFFILIATE -- TIDELANDS ROYALTY TRUST "B" At June 30, 1998 and 1997, the Trust owned 32.63% of the outstanding units of interest in Tidelands Royalty Trust "B" ("Tidelands"). The 452,366 units owned by the Trust had a quoted market value of $2,827,288, and $2,657,650 at June 30, 1998 and 1997, respectively. The Trust and Tidelands share certain common costs which are allocated based on their respective net revenues. The investment in affiliate is accounted for by the equity method. The following summarizes changes in this account for 1998 and 1997:
1998 1997 --------- --------- Balance at beginning of year................................ $ 285,478 $ 266,482 Equity in earnings of affiliate............................. 461,095 319,251 Distribution of earnings.................................... (439,903) (300,255) --------- --------- Balance at end of year...................................... $ 306,670 $ 285,478 ========= =========
At June 30, 1998 and 1997, receivables from affiliate includes $104,523 and $57,321, respectively, of income distributable to the Trust as a Tidelands unitholder. The following summary financial statements have been derived from the unaudited consolidated financial statements of Tidelands. BALANCE SHEETS ASSETS
JUNE 30 ------------------------ 1998 1997 ---------- ---------- Cash and cash equivalents................................... $1,924,316 $1,716,781 Oil and gas royalties receivable............................ 138,934 282,748 Other....................................................... 4,830 3,980 ---------- ---------- $2,068,080 $2,003,509 ========== ==========
LIABILITIES AND TRUST EQUITY Liabilities (including $329,559 and $184,816 payable to unitholders in 1998 and 1997, respectively)........................... $1,166,776 $1,167,149 Corpus...................................................... 2 2 Undistributed income........................................ 901,302 836,358 ---------- ---------- $2,068,080 $2,003,509 ========== ==========
18 21 MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE YEARS ENDED JUNE 30, 1998 STATEMENTS OF INCOME
YEAR ENDED JUNE 30 -------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Income.......................................... $1,537,607 $1,065,247 $1,273,021 Expenses........................................ 108,331 70,531 76,262 ---------- ---------- ---------- Income before Federal income taxes......... 1,429,276 994,716 1,196,759 Federal income taxes of Tidelands' subsidiary... 16,150 16,300 17,600 ---------- ---------- ---------- Net income................................. $1,413,126 $ 978,416 $1,179,159 ========== ========== ==========
Tidelands is a registrant with the Securities and Exchange Commission and has filed a Form 10-K as of December 31, 1997. (3) OVERPAID ROYALTIES The Trust's subsidiary, Marine Petroleum Corporation, has provided an account payable of $758,250 to cover possible refunds that may be required upon redetermination of gas prices for royalty payments in prior periods. During the most recent fiscal year, Marine Petroleum Corporation determined that $137,474 of the previously-established account payable for possible royalty overpayments no longer was required. Accordingly, during the most recent fiscal year, Marine Petroleum Corporation reduced accounts payable, and increased net income by such amount. During the most recent fiscal year, Chevron requested repayment for certain royalties that Chevron believes were incorrectly paid to Marine Petroleum Corporation during 1995, 1996 and 1997. Marine Petroleum Corporation established a reserve of $167,000 in the current period to cover this potential liability. In August of 1998, Marine Petroleum Corporation repaid $157,000 to Chevron to resolve this matter. (4) SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED) The following quarterly financial information for fiscal year 1998 and 1997 is unaudited; however, in the opinion of management, all adjustments necessary to a fair statement of the results of operations for the interim periods have been included.
NET OIL AND GAS INCOME ROYALTIES EXPENSES NET INCOME PER UNIT ----------- -------- ---------- -------- Quarter ended: September 30, 1997....................... $ 608,210 35,705 712,345 .36 December 31, 1997........................ 825,162 37,135 940,619 .47 March 31, 1998........................... 562,845 38,230 685,609 .34 June 30, 1998............................ 580,909 35,296 641,885 .32 ---------- ------- --------- ---- $2,577,126 146,366 2,980,458 1.49 ========== ======= ========= ==== Quarter ended: September 30, 1996....................... $ 861,011 27,858 927,649 .46 December 31, 1996........................ 1,085,760 47,881 1,137,457 .57 March 31, 1997........................... 882,772 36,520 954,040 .48 June 30, 1997............................ 815,461 30,804 895,051 .45 ---------- ------- --------- ---- $3,645,004 143,063 3,914,197 1.96 ========== ======= ========= ====
19 22 MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE YEARS ENDED JUNE 30, 1998 (5) SUPPLEMENTAL INFORMATION RELATING TO OIL AND GAS RESERVES (UNAUDITED) Oil and gas reserve information relating to the Trust's and Tidelands' royalty interests is not presented because such information is not available to the Trust or Tidelands. The Trust's share of oil and gas produced for its royalty interests and the Trust's equity in oil and gas produced for Tidelands' royalty interests were as follows:
1998 1997 1996 ------- ------- ------- Trust: Oil (barrels).......................................... 59,343 71,776 76,689 ======= ======= ======= Gas (mcf).............................................. 582,594 879,452 700,209 ======= ======= ======= Tidelands: Oil (barrels).......................................... 3,245 2,780 2,847 ======= ======= ======= Gas (mcf).............................................. 171,549 118,002 175,846 ======= ======= =======
20 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARINE PETROLEUM TRUST (Registrant) By: NATIONSBANK OF TEXAS, N.A. in its capacity as trustee of Marine Petroleum Trust and not in its individual capacity or otherwise By: /s/ JANE J. SHEA ---------------------------------- Jane J. Shea Vice President Date: September 21, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NATIONSBANK OF TEXAS, N.A. in its capacity as trustee of Marine Petroleum Trust and not in its individual capacity or otherwise By: /s/ JANE J. SHEA ---------------------------------- Jane J. Shea Vice President Date: September 21, 1998 /s/ R. RAY BELL ------------------------------------ R. Ray Bell (Acting Chief Accounting Officer) Date: September 21, 1998 21 24 INDEX TO EXHIBITS
EXHIBITS DESCRIPTION -------- ----------- (3) -- Indenture, as amended, of Marine, filed as Exhibit 3 to the Annual Report on Form 10-K of Marine Petroleum Trust for the fiscal year ended June 30, 1994, filed with the Securities and Exchange Commission and incorporated by reference herein. (4) -- Form of Certificate evidencing Unit(s) of Beneficial Interest, filed as Exhibit 4 to the Annual Report on Form 10-K of Marine Petroleum Trust for the fiscal year ended June 30, 1994, filed with the Securities and Exchange Commission and incorporated by reference herein. (21) -- Subsidiaries of Marine. (27) -- Financial Data Schedule.
EX-21 2 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF MARINE PETROLEUM TRUST
State of Company Name Incorporation ------------ ------------- Marine Petroleum Corporation Texas
EX-27 3 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1997 JUL-01-1996 JUN-30-1997 1,759,718 0 835,230 0 0 2,659,528 279 0 2,945,285 900,482 0 0 0 8 2,044,795 2,945,285 3,645,004 4,064,960 0 0 143,063 0 0 3,921,897 7,700 3,914,197 0 0 0 3,914,197 1.96 1.96
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