-----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, BoDMPPqxXuq3nF0yVVnJBnhSIQeV0OqxltE8xt+TJ1je8zmv105f2XlMLxCVSEcq 1R6A29oJj4aaBhE28k/bJg== 0000911609-97-000018.txt : 19971117 0000911609-97-000018.hdr.sgml : 19971117 ACCESSION NUMBER: 0000911609-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BP PRUDHOE BAY ROYALTY TRUST CENTRAL INDEX KEY: 0000850033 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 136943724 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10243 FILM NUMBER: 97719195 BUSINESS ADDRESS: STREET 1: C/O BANKOF NEW YORK STREET 2: 101 BARCLAY ST., 21ST FLOOR WEST CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 2128155084 10-Q 1 QUARTER ENDED SEPTEMBER 30, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ---------------- Commission File Number 1-10243 BP PRUDHOE BAY ROYALTY TRUST (Exact name of registrant as specified in its charter) Delaware 13-6943724 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) THE BANK OF NEW YORK 101 Barclay Street New York, New York 10286 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 815-5092 Not applicable (Former name, former address and former fiscal year, if changed since last report) 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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 13, 1997 21,400,000 Units of Beneficial Interest were outstanding. 1 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BP PRUDHOE BAY ROYALTY TRUST Statements of Assets, Liabilities and Trust Corpus (In thousands, except unit data)
September 30, 1997 December 31, Assets (Unaudited) 1996 ------ ------------- ------------ Royalty Interest (notes 1 and 2) $ 535,000 535,000 Less: accumulated amortization (285,421) (265,970) Prepaid expenses 141 -- -------- -------- Total assets $ 249,720 269,030 ======== ======== Liabilities and Trust Corpus ---------------------------- Accrued expenses 100 90 Trust corpus (40,000,000 units of beneficial interest authorized, 21,400,000 units issued and outstanding) 249,620 268,940 -------- -------- Total liabilities and Trust corpus $ 249,720 269,030 ======== ========
See accompanying notes to financial statements. 2 BP PRUDHOE BAY ROYALTY TRUST Statements of Cash Earnings and Distributions (In thousands, except unit data) (Unaudited)
Three months ended Nine months ended September 30, September 30, ------------------- ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Royalty revenues $ 8,770 11,701 35,960 29,721 Trust administrative expenses 221 299 585 663 ------ ------ ------ ------ Cash earnings $ 8,549 11,402 35,375 29,058 ====== ====== ====== ====== Cash distributions $ 8,549 11,402 35,375 29,058 ====== ====== ====== ====== Cash distributions per unit $ .399 .533 1.653 1.358 ====== ====== ====== ====== Units outstanding 21,400,000 21,400,000 21,400,000 21,400,000 ========== ========== ========== ==========
See accompanying notes to financial statements. 3 BP PRUDHOE BAY ROYALTY TRUST Statements of Changes in Trust Corpus (In thousands) (Unaudited)
Three months ended Nine months ended September 30, September 30, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Trust corpus at beginning of period $ 255,949 286,649 268,940 304,544 Cash Earnings 8,549 11,402 35,375 29,058 Increase in prepaid expenses 141 -- 141 -- (Increase) decrease in accrued expenses 85 177 (10) 53 Cash distributions (8,549) (11,402) (35,375) (29,058) Amortization of Royalty Interest (6,555) (8,886) (19,451) (26,657) ------- ------- ------- ------- Trust corpus at end of period $ 249,620 286,649 249,620 277,940 ======= ======= ======= =======
See accompanying notes to financial statements. 4 BP PRUDHOE BAY ROYALTY TRUST Notes to Financial Statements September 30, 1997 (Unaudited) (1) Formation of the Trust and Organization BP Prudhoe Bay Royalty Trust (the "Trust") was formed pursuant to a Trust Agreement dated February 28, 1989 among The Standard Oil Company ("Standard Oil"), BP Exploration (Alaska) Inc. (the "Company"), The Bank of New York (the "Trustee") and The Bank of New York (Delaware), as co-trustee. Standard Oil and the Company are indirect wholly owned subsidiaries of The British Petroleum Company p.l.c. ("BP"). On February 28, 1989, Standard Oil conveyed an overriding royalty interest (the "Royalty Interest") to the Trust. The Trust was formed for the sole purpose of owning and administering the Royalty Interest. The Royalty Interest represents the right to receive, effective February 28, 1989, a per barrel royalty (the "Per Barrel Royalty") on 16.4246% of the lesser of (a) the first 90,000 barrels of the average actual daily net production of oil and condensate per quarter or (b) the average actual daily net production of oil and condensate per quarter from the Company's working interest as of February 28, 1989 in the Prudhoe Bay Unit, located on the North Slope of Alaska. Trust Unit holders will remain subject at all times to the risk that production will be interrupted or discontinued or fall, on average, below 90,000 barrels per day in any quarter. BP has guaranteed the performance by the Company of its payment obligations with respect to the Royalty Interest. The Trust is passive, with the Trustee having only such powers as are necessary for the collection and distribution of revenues, the payment of Trust liabilities and the protection of the Royalty Interest. (2) Basis of Accounting The financial statements of the Trust are prepared on a modified cash basis and reflect the Trust's assets, liabilities and trust corpus and earnings and distributions as follows: (a) Revenues are recorded when received (generally within 15 days of the end of the preceding quarter) and distributions to Trust Unit holders are recorded when paid. (b) Trust expenses (which generally include accounting, engineering, legal, and other professional fees, trustees' fees and out-of-pocket expenses) are recorded on an accrual basis. 5 (c) Amortization of the Royalty Interest is calculated based on the units-of-production attributable to the Trust over the production of estimated proved reserves attributable to the Trust (approximately 111,000,000 barrels at December 31, 1996), is charged directly to the Trust corpus, and does not affect cash earnings. The rate for amortization per net equivalent barrel of oil and condensate was $4.82 for the three and nine months ended September 30, 1997 and $6.61 for the three and nine months ended September 30, 1996. The remaining unamortized balance of the net overriding Royalty Interest at September 30, 1997 is not necessarily indicative of the fair market value of the interest held by the Trust. While these statements differ from financial statements prepared in accordance with generally accepted accounting principles, the cash basis of reporting revenues and distributions is considered to be the most meaningful because quarterly distributions to the Unit holders are based on net cash receipts. The accompanying modified cash basis financial statements contain all adjustments necessary to present fairly the assets, liabilities and Trust corpus of the Trust as of September 30, 1997 and December 31, 1996 and the modified cash earnings and distributions and changes in Trust corpus for the three and nine months ended September 30, 1997 and 1996. The adjustments are of a normal recurring nature and are, in the opinion of management, necessary to fairly present the results of operations for the period. The financial statements should be read in conjunction with the financial statements and related notes in the Trust's 1996 Annual Report on Form 10-K. The cash earnings and distributions for the interim period presented are not necessarily indicative of the results to be expected for the full year. (3) Income Taxes The Trust files its federal tax return as a grantor trust subject to the provisions of subpart E of Part I of Subchapter J of the Internal Revenue Code of 1986, as amended rather than an association taxable as a corporation. The Unit holders are treated as the owners of Trust income and corpus, and the entire taxable income of the Trust will be reported by the Unit Holders on their respective tax returns. If the Trust were determined to be an association taxable as a corporation, it would be treated as an entity taxable as a corporation on the taxable income from the Royalty Interest, the Trust Unit holders would be treated as shareholders, and distributions to Trust Unit holders would not be deductible in computing the Trust's tax liability as an association. 6 ITEM 2. TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Item should be read in conjunction with the unaudited financial statements and the notes thereto in Item 1. Liquidity and Capital Resources The Trust is a passive entity, and the Trustee's activities are limited to collecting and distributing the revenues from the Royalty Interest and paying liabilities and expenses of the Trust. The Trust has no source of liquidity and no capital resources other than the revenue attributable to the Royalty Interest that it receives from time to time. See, generally, Note 1 of Notes to Financial Statements in Item 1. Also, see the discussion under "THE PRUDHOE BAY UNIT - Reserve Estimates" and "INDEPENDENT OIL AND GAS CONSULTANTS' REPORT" in Item 1 of the Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 for information concerning the estimated future net revenues of the Trust. Results of Operations Royalty revenues are received on the Quarterly Record Date (generally the fifteenth day of the month) following the end of the calendar quarter in which the related royalty production occurred. The Trustee, to the extent possible, pays all expenses of the Trust for each quarter on the Quarterly Record Date on which the revenues for the quarter are received. Both revenues and Trust expenses are recorded on a cash basis for purposes of distributions to Unit holders and, as a result, royalties paid to the Trust and distributions to Unit holders in the quarter ended September 30 of each year are attributable to the Company's operations during the quarter ended June 30 of that year, while royalties paid to the Trust and distributions to Unit holders in the nine month period ended September 30 of each year are attributable to the Company's operations during the first six months of such year and the last three months of the preceding year. The following table shows the factors employed to compute the Per Barrel Royalty received by the Trust during the three quarterly periods ended September 30, 1997 and 1996 (see "THE ROYALTY INTEREST" in Part I, Item 1 of the Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 for an explanation of the items listed below). The information in the table has been furnished by the Company. 7
Quarter Ended Quarter Ended --------------------------- --------------------------- 6/30/97 3/31/97 12/31/96 6/30/96 3/31/96 12/31/95 ------- ------- -------- ------- ------- -------- Average WTI Price $ 19.91 22.86 24.71 21.70 19.74 18.16 ------ ------ ------ ------ ------ ------ Chargeable Costs $ 8.85 8.85 8.50 8.50 8.50 8.25 Cost Adjustment Factor 1.2686 1.2647 1.2568 1.2409 1.2274 1.2171 ------ ------ ------ ------ ------ ------ Adjusted Chargeable Costs $ 11.23 11.19 10.68 10.55 10.43 10.04 Production Taxes 2.16 2.61 2.89 2.45 2.17 1.94 ------ ------ ------ ------ ------ ------ $ 13.39 13.80 13.57 13.00 12.60 11.98 ------ ------ ------ ------ ------ ------ Per Barrel Royalty $ 6.52 9.06 11.13 8.70 7.14 6.18 ====== ====== ====== ====== ====== ======
As long as the Company's average daily net production from the Prudhoe Bay Unit exceeds 90,000 barrels, which the Company currently projects will continue until the year 2009, the only factors affecting the Trust's revenues and distributions to Unit holders are changes in WTI Prices, scheduled annual increases in Chargeable Costs, changes in the Consumer Price Index, changes in Production Taxes and changes in the expenses of the Trust. Three and Nine Months Ended September 30, 1997 Compared to Three and Nine Months Ended September 30, 1996 The Trust's royalty revenues in the three-month period ended September 30, 1997 decreased approximately 25% from the quarter ended September 30, 1996; however, revenues in the nine-month period ended September 30, 1997 increased by approximately 21% over the comparable period ended September 30, 1996. The Average WTI Price in the second quarter of 1997 was approximately 8.2% below the Average WTI Price for the second quarter of 1996, but revenues received in the nine months ended September 30, 1997 benefitted from Average WTI Prices which were significantly higher in the fourth quarter of 1996 and the first quarter of 1997 (by 36.1% and 15.8%, respectively) than in fourth quarter of 1995 and the first quarter of 1996. Total deductions from the Average WTI Price (consisting of Adjusted Chargeable Costs and Production Taxes) increased by $0.39 (approximately 3%) from the second quarter of 1996 to the second quarter of 1997. Trust administrative expenses for the three months and nine months ended September 30, 1997 decreased by approximately 26% and 11.8%, respectively, from the comparable periods of 1996. Changes in Trust administrative expenses from period to period are affected by the timing of invoices submitted by service providers to the Trust. 8 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable ITEM 5. OTHER INFORMATION On October 15, 1997, the Trust received a cash royalty payment of $8,622,187 from the Company with respect to the period July 1, 1997 to September 30, 1997 and, after adding investment income of $20,827 and deducting expenses of $260,071, distributed $8,382,944, or approximately $0.392 per Unit, on October 20, 1997 to Unit holders of record on October 15, 1997. ITEM 6. EXHIBITS AND REPORTS ON 8-K (a) Exhibits 4.1 BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 among The Standard Oil Company, BP Exploration (Alaska) Inc., The Bank of New York, Trustee, and F. James Hutchinson, Co-Trustee. 4.2 Overriding Royalty Conveyance dated February 27, 1989 between BP Exploration (Alaska) Inc. and The Standard Oil Company. 4.3 Trust Conveyance dated February 28, 1989 between The Standard Oil Company and BP Prudhoe Bay Royalty Trust. 4.4 Support Agreement dated as of February 28, 1989 among The British Petroleum Company p.l.c., BP Exploration (Alaska) Inc., The Standard Oil Company and BP Prudhoe Bay Royalty Trust. 27 Financial Data Schedule 9 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1997. 10 SIGNATURES Pursuant to the requirements 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. BP PRUDHOE BAY ROYALTY TRUST BY: THE BANK OF NEW YORK, as Trustee By: /s/ Marie Trimboli ------------------------ Marie Trimboli Assistant Treasurer Date: November 14, 1997 The registrant is a trust and has no officers or persons performing similar functions. No additional signatures are available and none have been provided. 11 INDEX TO EXHIBITS Exhibit Exhibit No. Description ------- ----------- *4.1 BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 among The Standard Oil Company, BP Exploration (Alaska) Inc., The Bank of New York, Trustee, and F. James Hutchinson, Co-Trustee. *4.2 Overriding Royalty Conveyance dated February 27, 1989 between BP Exploration (Alaska) Inc. and The Standard Oil Company. *4.3 Trust Conveyance dated February 28, 1989 between The Standard Oil Company and BP Prudhoe Bay Royalty Trust. *4.4 Support Agreement dated as of February 28, 1989 among The British Petroleum Company p.l.c., BP Exploration (Alaska) Inc., The Standard Oil Company and BP Prudhoe Bay Royalty Trust. **27. Financial Data Schedule. - --------- * Incorporated by reference to the correspondingly numbered exhibit to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (Commission File No. 1-10243). ** Filed herewith. EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the unaudited financial statements of BP Prudhoe Bay Royalty Trust as of, and for the three and nine month periods ended, September 30, 1997 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 SEP-30-1997 SEP-30-1997 0 0 0 0 0 0 0 0 0 0 141 141 535,000 535,000 (285,421) (285,421) 249,720 249,720 100 100 0 0 0 0 0 0 249,620 249,620 0 0 249,720 249,720 0 0 8,770 35,960 0 0 0 0 221 585 0 0 0 0 8,549 35,375 0 0 8,549 35,375 0 0 0 0 0 0 8,549 35,375 0.399 1.653 0.399 1.653
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