Introduction

BP Prudhoe Bay Royalty Trust (the “Trust”) is a grantor trust created in 1989 to hold a royalty interest in the Prudhoe Bay oil field in Alaska. The Trust receives a royalty payment from Hilcorp North Slope, LLC (formerly BP Alaska) based on the production and price of oil from the Prudhoe Bay field.

Recent Developments

• The average daily closing WTI price was below the “break-even” price for the quarter ended June 30, 2024, resulting in a negative value for the payment calculation for the quarter. However, the Trust Agreement prevents the payment from being less than zero.

• The Trustee paid all accrued expenses of the Trust through June 30, 2024, totaling $334,765, from the cash reserve. The Trustee continues to evaluate the adequacy of the cash reserve.

• The Trust did not receive any Royalty Payments in 2023 or the first half of 2024 due to declining WTI prices and increasing Adjusted Chargeable Costs. The Trust will terminate if net revenues are less than $1 million per year for two successive years.

Forward-Looking Statements

The report contains forward-looking statements regarding future changes in oil prices, production, expenses, economic conditions, and other factors that could affect the Trust’s performance. These statements are subject to risks and uncertainties beyond the control of the Trustee.

Liquidity and Capital Resources

• The Trust is a passive entity with no source of liquidity other than the royalty revenues it receives. The Trustee has established a cash reserve to provide liquidity during periods of low or no revenue.

• Due to the economic impacts of COVID-19 in 2020, the Trust did not receive any revenue from the Royalty Interest from 2020 through the first quarter of 2021. This depleted the cash reserve, which the Trustee has since rebuilt to $6 million.

• The Trustee will continue to withhold funds from any future Royalty Payments to maintain the $6 million cash reserve, which is intended to cover expenses during the winding up of the Trust.

Results of Operations

• Changes in oil prices, Chargeable Costs, Production Taxes, and production levels significantly impact the Trust’s revenues and results.

• The Trust did not receive any Royalty Payments in the second quarter of 2024 or 2023 due to WTI prices being below the “break-even” level.

• Compared to the same period in 2023, the Trust’s cash earnings and distributions decreased in the second quarter of 2024 due to the lack of Royalty Payments. Administrative expenses also decreased slightly.

• For the first half of 2024 compared to the first half of 2023, the Trust’s royalty revenues, cash earnings, and distributions all decreased significantly due to the decline in WTI prices and increase in Adjusted Chargeable Costs. Administrative expenses increased slightly.

Outlook

The Trust’s future performance will depend heavily on oil prices remaining above the “break-even” level necessary to generate Royalty Payments. The U.S. Energy Information Administration forecasts WTI prices to average $79.95 per barrel in Q3 2024 and $81.47 per barrel in Q4 2024, but there is no assurance prices will be high enough for the Trust to receive Royalty Payments going forward.