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FORM 10-Q
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, 1995
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 Identification No.)
organization)
THE BANK OF NEW YORK
101 Barclay Street
New York, New York
Attention: Walter N. Gitlin 10286
(Address of principal executive offices) (Zip Code)
(212) 815-5084
(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 November 10, 1995 -- 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
Statement of Assets, Liabilities and Trust Corpus
September 30, 1995
(In thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
------ ------------- ------------
<S> <C> <C>
Royalty Interest (notes 1 and 2) $ 535,000 535,000
Less: accumulated amortization (221,346) (194,689)
--------- -------
Total assets $ 313,654 340,311
========= =======
Liabilities and Trust Corpus
----------------------------
Accrued expenses 80 118
Trust corpus (40,000,000 units of beneficial
interest authorized, 21,400,000 units
issued and outstanding) 313,574 340,193
Contingencies (note 3)
--------- -------
Total liabilities and
Trust corpus $ 313,654 340,311
========= =======
</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,
------------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Royalty revenues $ 9,698 8,640 26,760 22,976
Trust administrative expenses 185 171 593 555
----------- ---------- ---------- ----------
Cash earnings $ 9,513 8,469 26,167 22,421
=========== ========== ========== ==========
Cash distributions $ 9,513 8,469 26,167 22,421
=========== ========== ========== ==========
Cash distributions per unit $ .445 .396 1.223 1.048
=========== ========== ========== ==========
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,
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Trust corpus at beginning of period $ 322,482 373,858 340,193 407,057
Cash Earnings 9,513 8,469 26,167 22,421
Decrease (increase) in
accrued Trust expenses 75 57 38 (2)
Cash distributions (9,513) (8,469) (26,167) (22,421)
Amortization of Royalty Interest (8,983) (16,845) (26,657) (49,985)
--------- ------- ------- -------
Trust corpus at end of period $ 313,574 357,070 313,574 357,070
========= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 6
BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
September 30, 1995
(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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<PAGE> 7
BP PRUDHOE BAY ROYALTY TRUST
Notes to Financial Statements
(Unaudited)
(2), CONTINUED
(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
81,000,000 barrels at December 31, 1994), 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
$6.61 for the three and nine months ended September 30, 1995 and
$12.39 for the three and nine months ended September 30, 1994. The
remaining unamortized balance of the net overriding Royalty Interest
at September 30, 1995 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, 1995 and
December 31, 1994 and the modified cash earnings and distributions and
changes in Trust corpus for the three and nine months ended September 30,
1995 and 1994. These 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.
(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.
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<PAGE> 8
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 17, 1995 the Trust received its payment with respect to
the Royalty Interest for the period April 1, 1995 through June 30, 1995 (the
"Second Quarter"). Such payment was in the amount, after rounding, of $7.21 per
barrel. During the Second Quarter the average WTI Price was $19.32. The Adjusted
Chargeable Costs per barrel were $10.00, based on Chargeable Costs of $8.25 and
a Cost Adjustment Factor of 1.2116, and per barrel Production Taxes were $2.11.
After payment of Trust administrative expenses, the Trust distributed $.445 per
Unit. The payment received by the Trust with respect to the Royalty Interest for
the period April 1, 1994 through June 30, 1994 was in the amount, after
rounding, of $6.42 per barrel. During such period the average WTI price was
$17.79, the Adjusted Chargeable Costs per barrel were $9.44 and per barrel
Production Taxes were $1.93. After payment of Trust administrative expenses, the
Trust distributed $.396 per Unit for such period.
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<PAGE> 9
The per barrel royalty payable to the Trust for the period July
1, 1995 through September 30, 1995 (the "Third Quarter") is, after rounding,
$5.96. During the Third Quarter the average WTI price was $17.87. The Adjusted
Chargeable Costs per barrel were $10.00, based on Chargeable Costs of $8.25 and
a Cost Adjustment Factor of 1.2116, and per barrel Production Taxes were $1.90.
The payment received by the Trust with respect to the Royalty Interest for the
period July 1, 1994 through September 30, 1994 was in the amount, after
rounding, of $6.93 per barrel. During such period the average WTI price was
$18.49, the Adjusted Chargeable Costs per barrel were $9.53 and per barrel
Production Taxes were $2.02.
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<PAGE> 10
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.
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<PAGE> 11
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/ Robert F. McIntyre
------------------------
Name: Robert F. McIntyre
Title: Assistant Vice President
Date: November 13, 1995
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
Exhibit No. Description Page No.
- ---------- ----------- -------
EX-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> 3-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 313,654,000
<CURRENT-LIABILITIES> 80,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 313,574,000
<TOTAL-LIABILITY-AND-EQUITY> 313,654,000
<SALES> 0
<TOTAL-REVENUES> 26,760,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,167,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,167,000
<EPS-PRIMARY> 1.223
<EPS-DILUTED> 1.223
</TABLE>
