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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 September 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) 815-5092
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(Registrant's 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 November 10, 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 - 8 below)
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BP PRUDHOE BAY ROYALTY TRUST
Financial Statements
September 30, 1994
(Unaudited)
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BP PRUDHOE BAY ROYALTY TRUST
Statement of Assets, Liabilities and Trust Corpus
September 30, 1994
(In thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1994 1993
------ ------------ ------------
<S> <C> <C>
Royalty Interest (notes 1 and 2) $ 535,000 535,000
Less: accumulated amortization (177,844) (127,859)
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Total assets $ 357,156 407,141
========== ==========
Liabilities and Trust Corpus
----------------------------
Accrued expenses 86 84
Trust corpus (40,000,000 units of beneficial
interest authorized, 21,400,000 units
issued and outstanding) 357,070 407,057
Contingencies (note 3)
---------- ----------
Total liabilities and
Trust corpus $ 357,156 407,141
========== ==========
</TABLE>
See accompanying notes to financial statements.
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BP PRUDHOE BAY ROYALTY TRUST
Statement of Cash Earnings and Distributions
(In thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
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1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Royalty revenues $ 8,640 12,878 22,976 41,005
Trust administrative expenses 171 142 555 512
----------- ----------- ----------- -----------
Cash earnings $ 8,469 12,736 22,421 40,493
=========== =========== =========== ===========
Cash distributions $ 8,469 12,736 22,421 40,493
=========== =========== =========== ===========
Cash distributions per unit $ .396 0.595 1.048 1.892
=========== =========== =========== ===========
Units outstanding 21,400,000 21,400,000 21,400,000 21,400,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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BP PRUDHOE BAY ROYALTY TRUST
Statement of Changes in Trust Corpus
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------- -------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Trust corpus at beginning of period $ 373,858 422,452 407,057 437,666
Cash Earnings 8,469 12,736 22,421 40,493
Decrease (increase) in
accrued Trust expenses 57 84 (2) 49
Cash distributions (8,469) (12,736) (22,421) (40,493)
Amortization of Royalty Interest (16,845) (7,715) (49,985) (22,894)
--------- --------- --------- ---------
Trust corpus at end of period $ 357,070 414,821 357,070 414,821
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
September 30, 1994
(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 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.
(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 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.
(Continued)
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2
BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
(Unaudited)
(2), Continued
(c) The Royalty Interest is recorded on an amortized cost
basis and, therefore, the net overriding Royalty
Interest at September 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 nine months
ended September 30, 1994 and $5.67 for the three and
nine months ended September 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
September 30, 1994 and December 31, 1993 and the modified cash
earnings and distributions and changes in Trust corpus for the three
and nine months ended September 30, 1994 and 1993.
(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 July 15, 1994 the Trust received its payment with respect to the
Royalty Interest for the period April 1, 1994 through June 30, 1994 (the
"Second Quarter"). Such payment was in the amount, after rounding, of $6.42
per barrel. 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. After payment of Trust administrative expenses, the Trust
distributed $0.396 per Unit. 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. After payment of Trust
administrative expenses, the Trust distributed $0.595 per Unit for such
period.
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The per barrel royalty payable to the Trust for the period July 1,
1994 through September 30, 1994 (the "Third Quarter") is, after rounding,
$6.93. During the Third Quarter the average WTI price was $18.49. The Adjusted
Chargeable Costs per barrel were $9.53, based on Chargeable Costs of $8.00 and
a Cost Adjustment Factor of 1.1917, and per barrel Production Taxes were
$2.02. The payment received by the Trust with respect to the Royalty Interest
for the period July 1, 1993 through September 30, 1993 was in the amount,
after rounding, of $7.88 per barrel. During such period the average WTI price
was $17.77, the Adjusted Chargeable Costs per barrel were $7.96 and per barrel
Production Taxes were $1.92.
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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. 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.
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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: Walter N. Gitlin
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Name: Walter N. Gitlin
Title: Vice President
Date: November 10, 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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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule
<TABLE> <S> <C>
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 357,156,000
<CURRENT-LIABILITIES> 86,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 357,070,000
<TOTAL-LIABILITY-AND-EQUITY> 357,156,000
<SALES> 0
<TOTAL-REVENUES> 22,976,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,421,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,241,000
<EPS-PRIMARY> 1.048
<EPS-DILUTED> 1.048
</TABLE>
