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FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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Commission File Number 1-10243
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BP PRUDHOE BAY ROYALTY TRUST
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(Exact name of registrant as specified in its charter)
Delaware 13-6943724
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
THE BANK OF NEW YORK
101 Barclay Street
New York, New York
Attention: Walter N. Gitlin 10286
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(Address of principal executive offices) (Zip Code)
(212) 815-5084
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(Registrants telephone number, including area code)
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 .
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Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of August 5, 1994 -- 21,400,000 Units of Beneficial Interest in the BP
Prudhoe Bay Royalty Trust were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(See pages 3 - 9 below)
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BP PRUDHOE BAY ROYALTY TRUST
Financial Statements
June 30, 1994
(Unaudited)
3
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BP PRUDHOE BAY ROYALTY TRUST
Statement of Assets, Liabilities and Trust Corpus
June 30, 1994
(In thousands, except unit data)
(Unaudited)
<CAPTION>
June 30, December 31,
Assets 1994 1993
------ ------------ ------------
<S> <C> <C>
Royalty Interest (notes 1 and 2) $ 535,000 535,000
Less: accumulated amortization (160,999) (127,859)
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Total assets $ 374,001 407,141
========= =========
Liabilities and Trust Corpus
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Accrued expenses 143 84
Trust corpus (40,000,000 units of beneficial
interest authorized, 21,400,000 units
issued and outstanding) 373,858 407,057
Contingencies (note 3) --------- ---------
Total liabilities and
Trust corpus $ 374,001 407,141
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
BP PRUDHOE BAY ROYALTY TRUST
Statement of Cash Earnings and Distributions
(In thousands, except unit data)
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Royalty revenues $ 5,164 12,918 14,336 28,127
Trust administrative expenses 284 286 384 370
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Cash earnings $ 4,880 12,632 13,952 27,757
========= ========= ========= =========
Cash distributions $ 4,880 12,632 13,952 27,757
========= ========= ========= =========
Cash distributions per unit $ .228 .590 .652 1.297
========= ========= ========= =========
Units outstanding 21,400,000 21,400,000 21,400,000 21,400,000
========== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
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BP PRUDHOE BAY ROYALTY TRUST
Statement of Changes in Trust Corpus
(In thousands)
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Trust corpus at beginning of period $ 390,427 429,977 407,057 437,666
Cash Earnings 4,880 12,632 13,952 27,757
Decrease (increase) in
accrued Trust expenses 93 106 (59) (35)
Cash distributions (4,880) (12,632) (13,952) (27,757)
Amortization of Royalty Interest (16,662) (7,631) (33,140) (15,179)
-------- -------- -------- --------
Trust corpus at end of period $ 373,858 422,452 373,858 422,452
======== ======== ======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
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BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
June 30, 1994
(Unaudited)
(1) Formation of the Trust and Organization
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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 and a co-trustee (collectively, the "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 a 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 in the Prudhoe Bay Field (the "Field") located on the North Slope
of Alaska.
The co-trustees of the Trust are The Bank of New York, a New York
corporation authorized to do a banking business, and The Bank of New York
(Delaware), a Delaware banking corporation. The Bank of New York
(Delaware) serves as co-trustee in order to satisfy certain requirements of
the Delaware Trust Act. The Bank of New York alone is able to exercise the
rights and powers granted to the Trustee in the Trust Agreement.
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.
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2
BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
(Unaudited)
(2) Basis of Accounting
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The financial statements of the Trust are prepared on a modified cash basis
and reflect the Trust's assets, liabilities and results of operations 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 include accounting, engineering, legal, and other
professional fees, trustees' fees and out-of-pocket expenses) are recorded
when incurred.
(c) The Royalty Interest is recorded on an amortized cost basis and,
therefore, the net overriding Royalty Interest at June 30, 1994 is not
indicative of the fair market value of the interest held by the Trust.
Amortization of the Royalty Interest, which is calculated based on the
units-of-production attributable to the Trust over the production of
estimated proved reserves attributable to the Trust (approximately
43,200,000 barrels at December 31, 1993), 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 $12.39 for the three and
six months ended June 30, 1994 and $5.67 for the three and six months ended
June 30, 1993.
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 June 30, 1994 and December
31, 1993 and the modified cash earnings and distributions and changes in
Trust corpus for the three and six months ended June 30, 1994 and 1993.
(Continued)
8
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3
BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
(Unaudited)
(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 as 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.
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Item 2. Management's Discussion And Analysis
of Financial Condition and Results
of Operations.
Financial Condition.
-------------------
The Trust is a passive entity with the Trustee having only such
powers as are necessary for the collection and distribution of revenues
from the Royalty Interest, the payment of Trust liabilities and expenses
and the protection of the Royalty Interest. All royalty payments received
by the Trustee are distributed, net of Trust expenses, to Trust Unit
Holders. Accordingly, a discussion of liquidity or capital resources is
not applicable.
Results of Operations.
---------------------
The BP Prudhoe Bay Royalty Trust (the "Trust") was formed pursuant to
the BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 (the
"Trust Agreement") and holds a royalty interest generally entitling the
Trust to a per barrel royalty on 16.4246% of the first 90,000 barrels of
the average actual daily net production of oil and condensate per calendar
quarter from the BP Exploration (Alaska) Inc. working interest in the
Prudhoe Bay Unit.
Payments to the Trust with respect to the Royalty Interest are
payable on the fifteenth day after the end of the calendar quarter (or the
next succeeding business day if such fifteenth day is not a business day)
in an amount equal to the per barrel WTI Price for each day during the
calendar quarter less the sum of (i) the product of the per barrel
Chargeable Costs and the Cost Adjustments Factor (such product hereinafter
referred to as "Adjusted Chargeable Costs") and (ii) the per barrel
Production Taxes.
On April 15, 1994 the Trust received its payment with respect to the
Royalty Interest for the period January 1, 1994 through March 31, 1994 (the
"First Quarter"). Such payment was in the amount, after rounding, of $3.88
per barrel. During the First Quarter the average WTI Price was $14.80.
The Adjusted Chargeable Costs per barrel were $9.44, based on Chargeable
Costs of $8.00 and a Cost Adjustment Factor of 1.1797, and per barrel
Production Taxes were $1.48. After payment of Trust administrative
expenses, the Trust distributed $.228 per Unit. The payment received by
the Trust with respect to the Royalty Interest for the period January 1,
1993 through March 31, 1993 was in the amount, after rounding, of $9.71 per
barrel. During such period the average WTI price was $19.85, the Adjusted
Chargeable Costs per barrel were $7.90 and per barrel Production Taxes were
$2.24. After payment of Trust administrative expenses, the Trust
distributed $.590 per Unit for such period.
10
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The per barrel royalty payable to the Trust for the period April 1,
1994 through June 30, 1994 (the "Second Quarter") is, after rounding,
$6.42. During the Second Quarter the average WTI price was $17.79. The
Adjusted Chargeable Costs per barrel were $9.44, based on Chargeable Costs
of $8.00 and a Cost Adjustment Factor of 1.1797, and per barrel Production
Taxes were $1.93. The payment received by the Trust with respect to the
Royalty Interest for the period April 1, 1993 through June 30, 1993 was in
the amount, after rounding, of $9.57 per barrel. During such period the
average WTI price was $19.76, the Adjusted Chargeable Costs per barrel were
$7.96 and per barrel Production Taxes were $2.22.
11
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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 - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on 8-K
a. Exhibits
4. - Form of Trust Agreement (incorporated by reference to
Exhibit 6 to the Form 8-A Registration Statement of BP Prudhoe Bay Royalty
Trust, Commission File No. 1-10243)
27. - Financial Data Schedule - (see Exhibit 27.1 attached
hereto).
b. Reports on Form 8-K - No reports on Form 8-K have been filed
during the quarter for which this form is filed.
12
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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
THE BANK OF NEW YORK,
as Trustee
By: /s/ WALTER N. GITLIN
--------------------------
Name: Walter N. Gitlin
Title: Vice President
Date: August 5, 1994
The Registrant, BP Prudhoe Bay Royalty Trust, has no principal
executive officer, principal financial officer, board of directors or
persons performing similar functions. Accordingly, no additional
signatures are available and none have been provided.
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS AND THE STATEMENTS OF
CHANGES IN TRUST CORPUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 374,001,000
<CURRENT-LIABILITIES> 143,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 373,858,000
<TOTAL-LIABILITY-AND-EQUITY> 374,001,000
<SALES> 0
<TOTAL-REVENUES> 5,164,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,880,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,880,000
<EPS-PRIMARY> 0.228
<EPS-DILUTED> 0.228
</TABLE>
