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BP Prudhoe Bay Royalty Trust(BPT) - 2024 Q2 - Quarterly Report
BPTBP Prudhoe Bay Royalty Trust(BPT)2024-08-09 20:05

Financial Performance - Cash earnings for the three months ended June 30, 2024, were reported at a loss of 494,000,comparedtoalossof494,000, compared to a loss of 445,000 for the same period in 2023[4] - Cash earnings for the six months ended June 30, 2024, reported a loss of 765,adecreaseof112.9765, a decrease of 112.9% compared to a gain of 5,918 in the same period in 2023[51] - Royalty revenues for the six months ended June 30, 2024, were 0,a1000, a 100% decrease from 6,640 in the same period in 2023[51] - Cash distributions for the six months ended June 30, 2024, were 0,whilecashdistributionsperunitforthesixmonthsendedJune30,2023,were0, while cash distributions per unit for the six months ended June 30, 2023, were 0.2974[4] - The Trust's cash earnings and distributions for the interim periods are not necessarily indicative of the results expected for the full year[11] Assets and Liabilities - As of June 30, 2024, total assets amounted to 4,537,000,adecreasefrom4,537,000, a decrease from 5,302,000 as of December 31, 2023, reflecting a decline of approximately 14.4%[3] - The Trust corpus decreased to 4,202,000from4,202,000 from 4,964,000 at the end of 2023, representing a reduction of about 15.4%[6] - The Trust's total liabilities as of June 30, 2024, were 335,000,slightlydownfrom335,000, slightly down from 338,000 at the end of 2023[3] - The Trust's total accrued expenses through June 30, 2024, amounted to 334,765,whichwerepaidfromthecashreserve[19]ProductionandRevenue−AsofJune30,2024,theaveragedailynetproductionwas61.5thousandbarrelsperday,withanaverageWTIpriceof334,765, which were paid from the cash reserve[19] Production and Revenue - As of June 30, 2024, the average daily net production was 61.5 thousand barrels per day, with an average WTI price of 80.62 per barrel[19] - The average adjusted chargeable costs were 90.69perbarrel,resultinginanegativeaverageperbarrelroyaltyof90.69 per barrel, resulting in a negative average per barrel royalty of (12.89)[19] - The Trust did not receive any royalty payments for the first and second quarters of 2024 due to declining WTI prices and increased production costs[19] - HNS's net production of oil and condensate allocated to the Trust has been less than 90,000 barrels per day annually from 2019 through 2024, with expectations of continued decline[35] - The average net production from the 1989 Working Interest declined by 4.1% in the six months ended March 31, 2024, due to the naturally declining production rate from the Prudhoe Bay field[48] Cash Reserve and Liquidity - The cash reserve was increased to approximately 6,000,000in2021toensureliquidityduringperiodswithoutrevenue[9]−TheTrusteeintendstocontinueevaluatingthecashreserveadequacyandmayadjustitbasedonprevailingcircumstances[9]−TheTrust′scashreservewasestablishedtoprovideliquidityduringperiodsofinsufficientrevenuefromtheroyaltyinterest[23]−ThecashreserveisintendedtocoverAdministrativeExpensesforatwo−yearperiodifnetrevenuesfromtheRoyaltyInterestfallbelow6,000,000 in 2021 to ensure liquidity during periods without revenue[9] - The Trustee intends to continue evaluating the cash reserve adequacy and may adjust it based on prevailing circumstances[9] - The Trust's cash reserve was established to provide liquidity during periods of insufficient revenue from the royalty interest[23] - The cash reserve is intended to cover Administrative Expenses for a two-year period if net revenues from the Royalty Interest fall below 1.0 million per year[28] Market Conditions and Price Fluctuations - The Trust's revenues are significantly affected by fluctuations in oil prices, which are influenced by global supply and demand and geopolitical events[31] - The average WTI crude oil spot price fluctuated between a high of 83.47andalowof83.47 and a low of 70.38 per barrel in the first quarter of 2024, remaining below the "break-even" level necessary for the Trust to receive a Per Barrel Royalty[37] - The U.S. Energy Information Administration forecasts WTI prices to average 79.95perbarrelinQ32024and79.95 per barrel in Q3 2024 and 81.47 per barrel in Q4 2024, but there is no assurance these prices will be met[38] - The average WTI Price for Q1 2024 increased by 1.1% to 77.01comparedtoQ12023′s77.01 compared to Q1 2023's 76.17[43] - Average WTI Price for the six-month period in 2024 decreased by 2.1% to 77.75comparedto77.75 compared to 79.38 in 2023[48] Administrative and Other Expenses - Administrative expenses for the six months ended June 30, 2024, increased by 3.1% to 894comparedto894 compared to 867 in the same period in 2023[51] - The Trust's financial statements are prepared on a modified cash basis, reflecting the most meaningful representation of cash receipts and distributions[11] Trust Operations and Governance - The Trust's internal control over financial reporting was evaluated as effective as of June 30, 2024[54] - The Trust's termination may occur if net revenues from the royalty interest fall below 1millionperyearfortwoconsecutiveyears[19]−TheTrusteeincreasedthecashreservefrom1 million per year for two consecutive years[19] - The Trustee increased the cash reserve from 1.27 million by 500,000inJuly2021andfurtherincreaseditto500,000 in July 2021 and further increased it to 6.0 million in October 2021, fully funded from Royalty Payments[27] - The Trust's royalty interest had a carrying value of $535 million at inception, with accumulated amortization and impairment write-downs reducing its value to zero by December 31, 2010[12]