corresp
THE BANK OF NEW YORK MELLON
919 Congress Avenue
Austin, Texas 78701
September 23, 2010
Mr. H. Roger Schwall
Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E., Mail Stop 7010
Washington, D.C. 20549
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| Re: |
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BP Prudhoe Bay Royalty Trust
Form 10-K for the Fiscal Year Ended December 31, 2009
Filed March 1, 2010
File No. 1-10243 |
Dear Mr. Schwall:
As Trustee of the BP Prudhoe Bay Royalty Trust (the “Trust”), The Bank of New York Mellon is
responding to your letter dated August 20, 2010 in which the Staff of the Division provided the
Trust with certain comments concerning the above-captioned filing (the “2009 Form 10-K”). Our
responses, as Trustee on behalf of the Trust, to the Staff’s comments are indicated below. For
convenience of reference, we are setting forth the text of each comment, followed by the Trust’s
response.
Reserve Estimates, page 17
As a preface to the Trust’s responses to Staff comments 1 through 4 below, the Trustee
respectfully maintains that, while it is necessary and appropriate for the Trust to provide
material information concerning the oil and gas producing activities of BP Exploration (Alaska)
Inc. (“BP Alaska”) sufficient to permit investors in the Trust Units to evaluate the merits and
risks of their investment, strict compliance with all of the requirements of Items 1202 through
1208 of Regulation S-K would not serve this objective and would result in the provision of a body
of irrelevant, immaterial information that could, potentially, obscure investors’ understanding of
more pertinent facts. Although the Trust’s operations and financial condition depend upon oil
producing activities of BP Alaska, the Trust, as such does not engage, directly or indirectly, in
oil or gas producing activities. The property of the Trust consists of an overriding royalty
interest that entitles the Trust to a royalty on 16.4246% of the lesser of (i) the first 90,000
barrels of the average actual daily net production of crude oil and condensate per quarter from the
working interest of BP Alaska as of February 28, 1989 in the Prudhoe Bay oil field or (ii) the
average actual daily net production of crude oil and condensate per quarter from that working
interest. The Trust’s royalty interest is a non-operational interest in minerals. The Trust does
not directly or indirectly own any working interests. It does not have the right to take oil and
gas in kind, nor does it have any right to take over operations or to share in any operating
decision with respect to BP Alaska’s working interest in the Prudhoe Bay field. The only material
operations conducted by the Trust in its own right consist of receiving quarterly royalty payments
from BP Alaska and distributing the payments received, after deducting the Trustee’s expenses, pro
rata to the Trust Unit holders.
Securities and Exchange Commission
September 23, 2010
Page 2
STAFF COMMENT 1
| 1. |
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Please disclose and describe the internal controls you use in your reserves estimation
effort. See Item 1202(a)(7) of Regulation S-K. |
TRUST RESPONSE
For the reasons indicated above, the Trust does not have any part in the preparation of
reserve estimates relating to the Prudhoe Bay field, but receives pertinent information relating to
the reserves allocated to the Trust from BP Alaska. The Trustee’s review of the reserve information
provided by BP Alaska is included within the general disclosure control environment described in
Item 9A of the 2009 Form 10-K. Nevertheless, for the purpose of achieving substantive compliance
with Item 1202(a)(7) of Regulation S-K, the Trust proposes, if the Staff concurs, to amend the
fourth paragraph of the text under the heading “THE PRUDHOE BAY UNIT AND FIELD — Reserve
Estimates” in Item 1 of the 2009 Form 10-K to read as indicated in Annex A attached to this letter.
(Changes to the text of this and other sections proposed to be amended are marked in bold face type
for the convenience of the Staff.)
STAFF COMMENT 2
| 2. |
|
We note that your proved undeveloped reserves (“PUDs”) increased from 8.858 million barrels
as of December 31, 2008 to 11.067 million barrels as of December 31, 2009 after approximately
10.8 million barrels of PUDs allocated to you were converted to proved developed reserves in
2009. Please describe the reasons for the material changes in PUD balances, such as drilling
activity, improved recovery, extensions or discoveries. |
TRUST RESPONSE
The statement in the 2009 Form 10-K that 10.8 million barrels of proved undeveloped reserves
were converted to proved developed reserves erroneously refers to the volume contained in the
working interest upon which the Trust’s royalty interest is calculated and not to the volume
actually allocated to the Trust. The portion of the 10.8 million barrels actually allocated to the
Trust is 1.5 million barrels. Of the 1.5 million barrels of PUDs converted to proved developed
reserves in 2009, 1.75 million barrels are attributable to drilling activity and (0.25) million
barrels are attributable to a post-drilling analysis of PUD estimates made in 2007 to account for
actual drilling results. The Trust proposes to amend the fourth paragraph of the text under the
heading “THE PRUDHOE BAY UNIT AND FIELD — Reserve Estimates” in Item 1 of the 2009 Form 10-K as
indicated in Annex A to correct the number of PUDs converted to proved developed reserves.
STAFF COMMENT 3
| 3. |
|
Please discuss investments and progress made during the year to convert proved undeveloped
reserves to proved developed reserves, including, but not limited to, capital expenditures.
See Item 1203(c) of Regulation S-K. |
TRUST RESPONSE
If the Staff concurs, the Trust proposes to amend the fourth paragraph of the text under the
heading “THE PRUDHOE BAY UNIT AND FIELD — Reserve Estimates” in Item 1 of the 2009 Form 10-K as
indicated in Annex A. That paragraph discusses the conversion of proved undeveloped reserves to
proved developed reserves during 2009 and the activities responsible for the conversion. The
Trustee
Securities and Exchange Commission
September 23, 2010
Page 3
respectfully advises the Staff that the information required by Item 1203(c) of Regulation S-K
with respect to capital expenditures relating specifically to the tracts subject to the Trust’s
royalty interest is not available from BP Alaska. General information concerning BP Alaska’s
capital spending in Alaska is provided in Item 1A — RISK FACTORS of the 2009 Form 10-K.
STAFF COMMENT 4
| 4. |
|
We note that you have not included much of the disclosure required by Items 1205 to 1208 of
Regulation S-K. Please explain to us your basis for not providing such disclosure. |
TRUST RESPONSE
Items 1205 and 1206: If the Staff concurs, the Trust proposes to amend the text under
the heading “THE PRUDHOE BAY UNIT AND FIELD — Historical Production” in Item 1 of the 2009 Form
10-K as indicated in Annex A to include information concerning productive wells drilled in the
Prudhoe Bay field during 2007 — 2009. Material exploratory and development activities in the field
have been completed. Information concerning BP Alaska’s drilling activities in the Prudhoe Bay
field as of the end of 2009 is not available to the Trustee and the Trustee believes that the
information, if available, would be of marginal relevance to an investor in the Units since there
is only a tangential, conditional relationship between drilling activities in the field and Unit
investors’ entitlement to a royalty with respect to a capped volume of production of crude oil and
condensate from the leases subject to the royalty interest.
Item 1207: The Trustee respectfully submits that Item 1207 of Regulation S-K is not
applicable, since the payments received by the Trust are based exclusively on a percentage of the
first 90,000 barrels of the average actual daily net production of crude oil and condensate from
the leases subject to the overriding royalty conveyance. There is no relationship between any
delivery commitments of BP Alaska and the other owners of the working interests in the Prudhoe Bay
field and the Trust’s entitlement to the prescribed royalty payments.
Item 1208: The Trustee respectfully submits that Item 1208 of Regulation S-K is not
applicable, by definition, since the Trust does not directly or indirectly own any working
interests. However, if the Staff concurs, the Trust proposes to amend the text under the heading
“THE PRUDHOE BAY UNIT AND FIELD — The Prudhoe Bay Field” in Item 1 of the 2009 Form 10-K to
provide information concerning the gross acreage subject to the Trust’s royalty interest as
indicated in Annex A.
Risk Factors, page 22
STAFF COMMENT 5
| 5. |
|
We note your statement that “[t]his Item describes several such risks and uncertainties, but
not necessarily all of them.” Please eliminate the suggestion in the introductory paragraph
that you have not included all material risks in this section. |
TRUST RESPONSE
The Trust proposes to amend the 2009 Form 10-K to delete the preamble to Item 1A and the
suggestion that all material risks known to the Trustee have not been set forth in the Item.
Securities and Exchange Commission
September 23, 2010
Page 4
Liquidity and Capital Resources, page 27
STAFF COMMENT 6
| 6. |
|
Please provide a more detailed discussion of the changes in the cash balances of the trust
corpus, including a discussion of the increases or decreases in the various line items in the
Statements of Changes in Trust Corpus contained in the financial statements. |
TRUST RESPONSE
If the Staff concurs, the Trust proposes to amend the text under the captions “2009 compared
to 2008” and “2008 compared to 2007” as set forth in Annex B to this letter to provide a more
detailed comparison, in tabular form, and analysis of line items in the statements of cash earnings
and distributions and statements of changes in trust corpus.
Exhibit 31, Certification
STAFF COMMENT 7
| 7. |
|
We note that you do not provide the certification required by part 4(b) of Item 601(b)(31)(i)
of Regulation S-K regarding the trustee’s responsibility for designing internal controls over
financial reporting. Given your status as a large accelerated filer and the inclusion of the
trustee’s report on internal control over financial reporting pursuant to Item 308(a) of
Regulation S-K, please revise your certifications to include paragraph 4(b) of Item
601(b)(31)(i). |
TRUST RESPONSE
The certification required by part 4(b) of Item 601(b)(31)(i) of Regulation S-K was omitted
from the certificate filed as Exhibit 31 to the 2009 Form 10-K as the result of a clerical error.
We respectfully ask the Staff to note that the certificates subsequently filed by the Trust with
the Trust’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010
contain the requisite certification. The Trustee will ensure that future certifications filed by
the Trust with any future Form 10-K comply fully with the requirements of Item 601(b)(31)(i) of
Regulation S-K.
Exhibit 99.1
STAFF COMMENT 8
| 8. |
|
Please provide a discussion of the possible effects of regulation on the ability of the
registrant to recover the estimated reserves. See Item 1202(a)(8)(vi) of Regulation S-K. |
TRUST RESPONSE
Miller and Lents, Ltd. have requested the Trustee to ask the Staff to review the third to last
paragraph of their report and also to advise the Staff that they are not aware of any existing or
pending federal or state regulations that would materially affect the ability of BP Alaska to
recover the estimated reserves in the Prudhoe Bay field.
Securities and Exchange Commission
September 23, 2010
Page 5
____________________
The Trustee understands and acknowledges that: (i) the Trust is responsible for the adequacy
and accuracy of the disclosure in the 2009 Form 10-K; (ii) staff comments or changes to disclosure
in response to staff comments do not foreclose the Commission from taking any action with respect
to the 2009 Form 10-K; and (iii) the Trust may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal securities laws of the
United States.
Please provide copies of any further communications concerning this matter to: Richard
Bourgerie, Esq., Emmet, Marvin & Martin, LLP, 120 Broadway, New York, New York 10271. Telephone:
(212) 238-3027. Facsimile: (212) 238-3100. Email: rbourgerie@emmetmarvin.com.
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Very truly yours,
THE BANK OF NEW YORK MELLON, as Trustee
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By: |
/s/ Mike Ulrich
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Mike Ulrich |
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Vice President |
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| cc: |
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Sean Donahue
Alexandra M. Ledbetter |
ANNEX A
THE PRUDHOE BAY UNIT AND FIELD
* * *
The Prudhoe Bay Field
The Prudhoe Bay field is located on the North Slope of Alaska, 250 miles north of the Arctic
Circle and 650 miles north of Anchorage. The Prudhoe Bay field extends approximately 12 miles by 27
miles and contains nearly 150,000 gross productive acres. Approximately 45% of the acreage within
the field is subject to the Royalty Interest granted to the Trust by the Conveyance. The Prudhoe
Bay field, which was discovered in 1968 by BP and others, has been in production since 1977 and is
the largest producing oil field in North America. As of December 31, 2009, approximately 11.2
billion barrels of oil and condensate had been produced from the Prudhoe Bay field.
* * *
Historical Production
Production from the Prudhoe Bay field began on June 19, 1977, with the completion of the
Trans-Alaska Pipeline System (“TAPS”). As of December 31, 2009 there were about 1,037 active
producing oil wells, 32 gas reinjection wells, 216 water injection wells and 33 water and miscible
gas injection wells in the Prudhoe Bay field. Production wells drilled in the field during the
three years ended December 31, 2009 were: 44 in 2007; 49 in 2008; and 57 in 2009. No exploratory
drilling activities were conducted in the field during the three-year period. Production from the
Prudhoe Bay field reached a peak in 1988 and has declined steadily since then. The average well
production rate was about 293 barrels per day in 2005, 223 barrels per day in 20061, 232
barrels per day in 2007, 232 barrels per day in 2008 and 243 barrels per day in 2009.
BP Alaska’s share of the hydrocarbon liquids production from the Prudhoe Bay field includes
oil, condensate and natural gas liquids. Using the production allocation procedures from the
Prudhoe Bay Unit Operating Agreement, the Prudhoe Bay field’s total production and the net share of
oil and condensate (net of State of Alaska royalty) allocated to the 1989 Working Interests have
been as follows during the past five years:
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Oil |
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Condensate |
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Net to 1989 |
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Net to 1989 |
Calendar |
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Working |
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Working |
year |
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Total field |
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Interests |
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Total field |
|
Interests |
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(thousand barrels per day) |
2005 |
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|
228.9 |
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|
101.5 |
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|
96.4 |
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11.7 |
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2006 |
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|
173.9 |
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|
77.1 |
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|
76.7 |
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9.3 |
|
2007 (a) |
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184.1 |
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81.6 |
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|
77.9 |
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9.4 |
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2008 |
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192.7 |
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85.4 |
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69.4 |
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8.4 |
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2009 |
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189.1 |
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83.9 |
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63.0 |
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7.6 |
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| 1 |
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The August 2006 partial shutdown of the
Prudhoe Bay Unit caused a temporary impact on production from the east side of
the Unit. |
A-1
| (a) |
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2007 production figures reported in the Trust’s Annual Report on Form 10-K for
the year ended December 31, 2007 have been revised to reflect actual production for the
year. |
* * *
Reserve Estimates
Proved oil reserves attributable to the 1989 Working Interests at December 31, 2009 are those
quantities of oil which, by analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible from 2009 forward from known reservoirs and
under existing economic conditions, operating methods and government regulations. Estimates of
proved reserves are inherently imprecise and subjective and are revised over time as additional
data become available. Such revisions often may be substantial. BP Alaska’s reserve estimates and
production assumptions and projections are predicated upon a reasonable estimate of the allocation
of hydrocarbon liquids between oil and condensate according to the procedures of the Prudhoe Bay
Unit Operating Agreement. Oil and condensate are physically produced in a commingled stream of
hydrocarbon liquids. The allocation of hydrocarbon liquids between the oil and condensate from the
Prudhoe Bay field is a theoretical calculation performed in accordance with procedures specified in
the Prudhoe Bay Unit Operating Agreement. Under the terms of an Issues Resolution Agreement entered
into by the Prudhoe Bay Unit owners in October 1990, the allocation procedures have been adjusted
to generally allocate condensate in a manner which approximates the anticipated decline in the
production of oil until an agreed original condensate reserve of 1,175 million barrels has been
allocated to the working interest owners.
There is no precise method of forecasting the allocation of reserve volumes to the Trust. The
Royalty Interest is not a working interest and the Trust is not entitled to receive any specific
volume of reserves from the 1989 Working Interests. The reserve volumes attributable to the 1989
Working Interests are estimated using an allocation of reserve volumes based on estimated future
production and the average WTI Price, and assume no future movement in the Consumer Price Index and
no changes to the procedure for calculating Production Taxes. The estimated reserve volumes
attributable to the Trust will vary if different estimates of production, prices and other factors
are used. Even if expected reservoir performance does not change, the estimated reserves, economic
life, and future revenues attributable to the Trust may change significantly in the future. This
may result from changes in the WTI Price or from changes in other prescribed variables utilized in
calculations defined by the Overriding Royalty Conveyance.
The reserves attributable to the 1989 Working Interests constitute only a part of the overall
reserves in the Prudhoe Bay Unit. BP Alaska has estimated that the net remaining proved reserves
allocated to the Trust as of December 31, 2009 were 68.144 million barrels of oil and condensate,
of which 57.077 million barrels are proved developed reserves2 and 11.067 million
barrels are proved undeveloped reserves3. Approximately 1.5 million barrels (net) of
proved undeveloped reserves allocated to the Trust were converted into proved developed reserves
during 2009 and approximately 2.2 million barrels (net) of proved undeveloped reserves allocated to
the Trust were added during 2009 as a result of planned drilling activity. There were no
contributions to proved undeveloped reserves from extensions or discoveries during 2009. To the
extent that the estimated volumes of proved undeveloped reserves include reserves the development
of which is scheduled to commence after five years, the inclusions are based on a development plan
which calls for drilling wells
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| 2 |
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Proved developed reserves are reserves that
can be expected to be recovered through existing wells with existing equipment
and operating methods or in which the cost of the required equipment is
relatively minor compared to the cost of a new well. |
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| 3 |
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Proved undeveloped reserves are reserves that
are expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion. |
A-2
over an extended period of time given the magnitude of the development. BP has a historical
record of completing comparable projects. Approximately 10.8 million barrels (net) of proved
undeveloped reserves allocated to the Trust were converted into proved developed reserves during
2009. Based on the 2009 twelve-month average WTI Price4 of $61.18 per barrel, other
economic parameters prescribed by the Conveyance, and utilizing procedures specified in Financial
Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 932, Extractive
Activities — Oil and Gas, BP Alaska calculated that as of December 31, 2009 production of oil and
condensate from the proved reserves allocated to the 1989 Working Interests will result in
estimated future net revenues to the Trust of $1,331 million, with a present value of $836.6
million.
The internal controls applicable to the foregoing estimates of the reserves allocated to the
Trust are those employed by BP, which provides the information to the Trustee. BPAlaska has advised
the Trustee that Mike Smith, BP’s Segment Reserves Authority, is the petroleum engineer primarily
responsible for overseeing the preparation of the reserve estimate. He has over 35 years of
diversified industry experience with the past ten years spent as the head of the reservoir
management function within BP. He is a member of the Society of Petroleum Engineers and the
Institute of Materials, Minerals and Mining. The Trust employs Miller and Lents, Ltd., an
international oil and gas consulting firm, to conduct an annual review of BP Alaska’s estimates of
the proved reserves allocated to the Trust, estimated future net revenues to the Trust, and the
remaining period of economic production from the Prudhoe Bay field have been reviewed by Miller and
Lents, Ltd., an international oil and gas consulting firm, as set forth in their report which. A
copy of the February 2010 report of Miller and Lents, Ltd. is filed as Exhibit 99 to this report
BP Alaska has undertaken a program of field-wide infrastructure renewal, pipeline replacement,
and mechanical improvements to wells. As a consequence of these activities and their required
downtime, and the natural production declines discussed above under “Historical Production,” BP
Alaska’s net production of oil and condensate allocated to the Trust from proved reserves was less
than 90,000 barrels per day on an annual basis in 2008 and 2009. BP Alaska anticipates that its
average net production of oil and condensate allocated to the Trust from proved reserves will be
below 90,000 barrels per day on an annual average basis most future years. The occurrence of major
gas sales could accelerate the decline in net production, due to the consequent decline in
reservoir pressure. See Item 1A, “RISK FACTORS.” Based on the 2009 twelve-month average WTI Price
of $61.18 per barrel, current Production Taxes, and the Chargeable Costs adjusted as prescribed by
the Overriding Royalty Conveyance, it is estimated that royalty payments to the Trust will continue
through the year 2023. BP Alaska expects continued economic production from the Prudhoe Bay field
at a declining rate through 2060; however, for the economic conditions and production forecast as
of December 31, 2009 the Per Barrel Royalty will be zero following the year 2023.
BP Alaska is under no obligation to make investments in development projects which would add
additional non-proved resources to proved reserves and cannot make such investments without the
concurrence of the Prudhoe Bay Unit working interest owners. The Prudhoe Bay Unit working interest
owners regularly assess the technical and economic attractiveness of implementing projects to
increase Prudhoe Bay Unit proved reserves. See Item 1A, “RISK FACTORS,” below.
In the event of changes in BP Alaska’s current assumptions, oil and condensate recoveries may
be reduced from the current estimates, unless recovery projects other than those included in the
current estimates are implemented.
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| 4 |
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The unweighted arithmetic average of the WTI
Price on the first day of each month during the year. |
A-3
ANNEX B
2009 compared to 2008
As explained in Note 2 of Notes to Financial Statements below, the financial statements of
the Trust are prepared on a modified cash basis and differ from financial statements prepared in
accordance with generally accepted accounting principles, in that (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 and (b) Trust expenses are recorded on an accrual basis. As a
consequence, Trust royalty revenues for the fiscal year are based on Royalty Production during the
twelve months ended September 30 of the preceding fiscal year.
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Increase (decrease) |
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2009 |
|
Amount |
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Percent |
|
2008 |
| |
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(Dollar amounts, except WTI Prices, in thousands) |
Average WTI Price* |
|
$ |
57.28 |
|
|
$ |
(50.66 |
) |
|
|
(46.9 |
) |
|
$ |
107.94 |
|
Royalty revenues |
|
$ |
130,014 |
|
|
$ |
(122,284 |
) |
|
|
(48.5 |
) |
|
$ |
252,298 |
|
Cash earnings |
|
$ |
158,033 |
|
|
$ |
(92,501 |
) |
|
|
(36.9 |
) |
|
$ |
250,534 |
|
Cash distributions |
|
$ |
128,575 |
|
|
$ |
(121,950 |
) |
|
|
(48.7 |
) |
|
$ |
250,525 |
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Administrative expenses |
|
$ |
1,459 |
|
|
$ |
(338 |
) |
|
|
(18.8 |
) |
|
$ |
1,797 |
|
Accrued expenses |
|
$ |
211 |
|
|
$ |
(67 |
) |
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|
(24.1 |
) |
|
$ |
278 |
|
Trust corpus at year end |
|
$ |
32,273 |
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|
$ |
27,516 |
|
|
|
578.4 |
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|
$ |
4,757 |
|
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| * |
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12 months ended September 30, 2008 and 2007 |
WTI Prices fell precipitously during the fourth quarter of 2008, from an average of
approximately $104 per barrel during September 2008 to an average of approximately $41 per barrel
during December 2008. WTI Prices then rose gradually during the first three quarters of 2009,
reaching a high average monthly price of approximately $71 during August 2009. The sharp drop in
average WTI Prices for the twelve months ended September 30, 2009 had a corresponding effect on
royalty revenues during the twelve months ended December 31, 2009. Approximately 19% of the Trust’s
cash earnings during 2009 represents a $29,474,000 payment from BP Alaska received by the Trust in
December 2009 in settlement of certain claims that arose from the 2006 partial shutdown of the
Prudhoe Bay Unit (see Note 7 of Notes to Financial Statements in Item 8). Cash distributions during
2009, however, exclude the settlement payment, which was distributed to Unit holders with the
regular quarterly distribution on January 15, 2010. Production Taxes charged against the Per Barrel
Royalty during the twelve months ended September 30, 2009 declined approximately 73% from the
preceding twelve-month period as a result of the progressivity feature of the 2007 ACES amendments
to the Alaska oil and gas tax statutes (see “THE ROYALTY INTEREST — Production Taxes” in Item 1).
The decrease in trust administrative expenses during the year ended December 31, 2009 is
principally due to declining legal fees and expenses. The increase in trust corpus at year end
reflects the undistributed settlement payment referred to above, net of amortization of the royalty
interest (see Note 2 of Notes to Financial Statements in Item 8).
B-1
2008 compared to 2007
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Increase (decrease) |
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2008 |
|
Amount |
|
Percent |
|
2007 |
| |
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(Dollar amounts, except WTI Prices, in thousands) |
Average WTI Price* |
|
$ |
107.94 |
|
|
$ |
43.28 |
|
|
|
66.9 |
|
|
$ |
64.66 |
|
Royalty revenues |
|
$ |
252,298 |
|
|
$ |
74,980 |
|
|
|
42.3 |
|
|
$ |
177,318 |
|
Cash earnings |
|
$ |
250,534 |
|
|
$ |
74,822 |
|
|
|
42.6 |
|
|
$ |
175,712 |
|
Cash distributions |
|
$ |
250,525 |
|
|
$ |
74,812 |
|
|
|
42.6 |
|
|
$ |
175,713 |
|
Administrative expenses |
|
$ |
1,797 |
|
|
$ |
110 |
|
|
|
7.1 |
|
|
$ |
1,678 |
|
Accrued expenses |
|
$ |
278 |
|
|
$ |
(165 |
) |
|
|
(37.3 |
) |
|
$ |
443 |
|
Trust corpus at year end |
|
$ |
4,757 |
|
|
$ |
(1,835 |
) |
|
|
(27.8 |
) |
|
$ |
6,592 |
|
|
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| * |
|
12 months ended September 30, 2007 and 2006 |
WTI Prices rose rapidly during the fourth quarter of 2007 and throughout the first half
of 2008, reaching a high of over $145 per barrel early in July 2008 before receding to an average
of approximately $104 per barrel during September 2008. The increases in WTI Prices during the
twelve months ended September 30, 2008 caused royalty revenues and cash earnings to rise during the
twelve months ended December 31, 2008 above those received during the twelve months ended December
31, 2007, but the higher tax rates imposed by ACES, imposed a significant burden on Per Barrel
Royalties. Production taxes charged against the average Per Barrel Royalty were approximately 264%
higher with respect to the twelve months ended September 30, 2008 than during the twelve months
ended September 30, 2007. An increase in trust administrative expenses during 2008 was principally
due to legal fees and expenses related to litigation and other issues arising from the 2006
shutdown of the Prudhoe Bay field. The decrease in trust corpus from 2007 to 2008 resulted
principally from the regular annual amortization of the royalty interest (see Note 2 of Notes to
Financial Statements in Item 8).
B-2