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BP Prudhoe Bay Royalty Trust(BPT) - 2023 Q4 - Annual Report
BPTBP Prudhoe Bay Royalty Trust(BPT)2024-03-13 16:00

Asset Transactions - BP Prudhoe Bay Royalty Trust sold its Alaska assets to Hilcorp Alaska, LLC for a total consideration of 5.6billion,completedonJune30,2020[8].RoyaltyInterestandProduction−TheTrustholdsaRoyaltyInterestof16.42465.6 billion, completed on June 30, 2020[8]. Royalty Interest and Production - The Trust holds a Royalty Interest of 16.4246% on the lesser of the first 90,000 barrels of actual average daily net production or the actual average daily net production from BP Alaska's working interest in the Prudhoe Bay oil field[17]. - Royalty Production is calculated as 16.4246% of the lesser of the first 90,000 barrels of actual average daily net production or the actual average daily net production from the 1989 Working Interests[46]. - The Trust's Royalty Interest is based on HNS's ownership interest in the oil rim participating area of 50.68% as of February 28, 1989[81]. - The Trust's Royalty Interest does not include production from other oil fields within the Prudhoe Bay Unit[78]. - HNS's share of net oil production allocated to the 1989 Working Interests was 65.3 thousand barrels per day in 2023, down from 75.5 thousand barrels per day in 2019, reflecting a decrease of about 13.4%[93]. - The average well production rate declined from 163 barrels per day in 2019 to 147 barrels per day in 2023, representing a decrease of approximately 9.8% over the five-year period[91]. Financial Performance - The Trust's total assets decreased from 6,067,000 in 2022 to 5,302,000in2023,adeclineofabout12.65,302,000 in 2023, a decline of about 12.6%[108]. - The Trust's cash and cash equivalents increased significantly from 132,000 in 2022 to 5,302,000in2023[108].−TheTrust′stotalliabilitiesrosefrom5,302,000 in 2023[108]. - The Trust's total liabilities rose from 280,000 in 2022 to 338,000in2023,anincreaseofapproximately20.7338,000 in 2023, an increase of approximately 20.7%[108]. - Royalty revenues for 2023 were 6,640,000, a significant decrease from 82,283,000in2022,anddownfrom82,283,000 in 2022, and down from 9,417,000 in 2021[112]. - Cash earnings for 2023 were 5,600,000,adrasticdeclinefrom5,600,000, a drastic decline from 80,888,000 in 2022 and 7,811,000in2021[115].−Cashdistributionsfor2023totaled7,811,000 in 2021[115]. - Cash distributions for 2023 totaled 6,365,000, compared to 80,823,000in2022and80,823,000 in 2022 and 2,007,000 in 2021[115]. - Cash distributions per unit for 2023 were 0.2974,significantlylowerthan0.2974, significantly lower than 3.7768 in 2022 and 0.0938in2021[112].−TheTrustdidnotreceiveanynetrevenuesattributabletoanyquarterin2023,markingacontinuationofrevenuechallenges[119].−TheTrust′scashreserveisbelievedtobesufficienttocoverfeesandexpensesforthenext12months[119].CostsandTaxes−ChargeableCostsperbarrelincreasedfrom0.0938 in 2021[112]. - The Trust did not receive any net revenues attributable to any quarter in 2023, marking a continuation of revenue challenges[119]. - The Trust's cash reserve is believed to be sufficient to cover fees and expenses for the next 12 months[119]. Costs and Taxes - Chargeable Costs per barrel increased from 23.75 in 2019 to 34.75in2023,withaprojectedincreaseto34.75 in 2023, with a projected increase to 37.50 in 2024[49]. - The Per Barrel Royalty is determined by the WTI Price minus Chargeable Costs and Production Taxes[47]. - Production Taxes for the Trust's Royalty Production are calculated based on the relevant quarter's tax minus allowable monthly stair-step per-barrel tax credits[54]. - HNS's production taxes for Q3 2023 were 2.90peraveragebarrelroyalty[63].−TheaverageWTIpriceforQ22023was2.90 per average barrel royalty[63]. - The average WTI price for Q2 2023 was 73.76, with production taxes at 2.57peraveragebarrelroyalty[63].−HNS′sproductiontaxesforQ12023were2.57 per average barrel royalty[63]. - HNS's production taxes for Q1 2023 were 2.67 per average barrel royalty[63]. Trust Operations and Governance - The Trust has no employees; all administrative functions are performed by the Trustee, which incurs liabilities primarily related to administrative expenses[26][27]. - The Trustee is authorized to borrow or sell Trust assets to pay liabilities if cash on hand is insufficient, with no distributions to Unit holders until borrowings are repaid[30]. - The Trust Agreement is irrevocable, and amendments can only be made with the approval of a majority of the outstanding Units, ensuring protection for Unit holders[32]. - The Trust's operations are passive, with no rights to take oil and gas in kind or influence operational decisions regarding HNS's working interest[25]. - Unit holders possess limited voting rights compared to shareholders, with no requirement for annual meetings[41]. - The Trust has no independent directors and is administered by the Trustee under the Trust Agreement[177]. - The Trust has not authorized any units for issuance under equity compensation plans[172]. Financial Reporting and Compliance - The Trust's financial statements are prepared on a modified cash basis, reflecting the most meaningful representation of cash receipts and distributions[121]. - The Trust's financial statements are not prepared in accordance with generally accepted accounting principles in the U.S.[101]. - The Trust maintained effective internal control over financial reporting as of December 31, 2023, according to the independent auditor's opinion[103]. - The Trust's internal control over financial reporting was evaluated as effective as of December 31, 2023[154]. - There were no changes in accountants or disagreements with accountants during the two fiscal years ended December 31, 2023[148]. Future Outlook and Risks - Future Royalty Payments may be affected by projected production declines and changes in oil prices[205]. - The Trust will terminate if net revenues from the Royalty Interest fall below 1,000,000peryearfortwoconsecutiveyears,unlessaffectedbya"forcemajeure"event[34].−Significantgeopoliticalevents,includingconflictsandsanctions,mayimpactcrudeoilpricesandmarketstability[203].−TheTrust′sestimatedlifeandreservevaluesfluctuatebasedonWTIpricechangesandotherfactors[204].−TheEIAforecastsBrentcrudeoilpricestoaverageapproximately1,000,000 per year for two consecutive years, unless affected by a "force majeure" event[34]. - Significant geopolitical events, including conflicts and sanctions, may impact crude oil prices and market stability[203]. - The Trust's estimated life and reserve values fluctuate based on WTI price changes and other factors[204]. - The EIA forecasts Brent crude oil prices to average approximately 82 per barrel in 2024[202]. Reserves and Production Estimates - Net proved reserves of oil and condensate attributable to the Trust as of December 31, 2023, were estimated to be 0 million barrels, compared to 8.232 million barrels in 2022[141]. - Proved developed reserves as of December 31, 2022, were 7,862 thousand barrels[145]. - Proved undeveloped reserves as of December 31, 2022, were 370 thousand barrels[145]. - The standardized measure of discounted future net cash flow relating to proved reserves was 56,751,000asofDecember31,2022[143].−TheTrust′sestimatedreservevolumesarebasedonanaverageWTIpriceof56,751,000 as of December 31, 2022[143]. - The Trust's estimated reserve volumes are based on an average WTI price of 78.22 per barrel for the 12-month period prior to December 31, 2023[194]. Trustee Fees and Audit - Trustee's fees for the year ended December 31, 2023, were 213,378,adecreasefrom213,378, a decrease from 215,538 in 2022[171]. - Total fees paid to KPMG LLP for audit services in 2023 amounted to $196,500, consistent with 2022[178].