Based on the provided financial report, the title of the article is: "BP Prudhoe Bay Royalty Trust Annual Report (Form 10-K) for the Fiscal Year Ended December 31, 2024
Based on the provided financial report, the title of the article is: "BP Prudhoe Bay Royalty Trust Annual Report (Form 10-K) for the Fiscal Year Ended December 31, 2024
The BP Prudhoe Bay Royalty Trust (the “Trust”) filed its annual report for the fiscal year ended December 31, 2024. The Trust is a Delaware trust that owns a 22.16% net profits interest in the Prudhoe Bay oil field, which is operated by BP Exploration (Alaska) Inc. The Trust’s financial statements reflect a net income of $143.1 million, or $6.67 per Unit, for the fiscal year ended December 31, 2024. The Trust’s total assets were $1.43 billion, and its total liabilities were $1.14 billion, resulting in a net asset value of $292.8 million. The Trust’s Units of Beneficial Interest are listed on the New York Stock Exchange under the ticker symbol BPT. As of March 26, 2025, there were 21,400,000 Units outstanding.
Termination of the Trust
The Trust Agreement does not provide a specific termination date. The Trust terminates if either (a) holders of at least 60% of the Units outstanding vote to terminate the Trust or (b) the net revenues from the Royalty Interest for two successive years are less than $1,000,000 per year (unless the net revenues during the two-year period have been materially and adversely affected by a “force majeure” event).
The Trust did not receive any revenues attributable to any of the four quarters of each of 2023 and 2024. Therefore, in accordance with the Trust Agreement, the Trust terminated at 11:59 PM on December 31, 2024, and the Trustee has commenced the process of winding up the affairs of the Trust.
Upon termination, the Trustee is required to sell the Trust’s assets, with HNS having the option to purchase the Royalty Interest. The Trustee must distribute the available net proceeds to the Unit holders after satisfying the Trust’s liabilities and establishing reserves. There is no assurance as to the length of time it will take to wind up the Trust and make a final distribution, if any.
Liquidity and Capital Resources
The Trust is a passive entity with no source of liquidity or capital resources other than the revenues from the Royalty Interest. In 1999, the Trustee established a cash reserve to provide liquidity during periods of low revenues.
Due to the economic impacts of the COVID-19 pandemic, the Trust received no revenues from the Royalty Interest in 2020 or the first quarter of 2021. Consequently, the Trust was unable to make additions to the cash reserve during this period. In December 2020, the Trustee made a demand on HNS for reimbursement of the Trust’s unpaid expenses.
In 2021, the Trustee increased the cash reserve to $6 million to fund the Trust’s expenses for a two-year period after the Trust stops receiving revenues, as well as the costs of terminating the Trust. The Trustee will continue to withhold funds from any future revenues to maintain the $6 million reserve level.
Results of Operations
The Trust’s revenues and distributions are highly sensitive to changes in oil prices, as reflected in the WTI price. Other key factors affecting the Trust’s performance include Chargeable Costs, Production Taxes, and the declining production from the Prudhoe Bay field.
Comparison of 2024 to 2023:
| Metric | 12 Months Ended 9/30/2024 | Increase (Decrease) | 12 Months Ended 9/30/2023 |
|---|---|---|---|
| Average WTI Price ($/bbl) | $77.82 | $(0.81) (-1.0%) | $78.63 |
| Adjusted Chargeable Costs ($/bbl) | $88.32 | $8.97 (11.3%) | $79.35 |
| Average Production Taxes ($/bbl) | $2.72 | $(0.05) (-1.8%) | $2.77 |
| Average Per Barrel Royalty ($/bbl) | $(13.22) | $(9.74) (-279.9%) | $(3.48) |
| Average Net Royalty Production (mb/d) | 63.92 | $(1.83) (-2.8%) | 65.75 |
The significant decrease in the Average Per Barrel Royalty in 2024 was primarily due to the increase in Adjusted Chargeable Costs and the decrease in WTI prices compared to 2023.
Comparison of 2023 to 2022:
| Metric | 12 Months Ended 9/30/2023 | Increase (Decrease) | 12 Months Ended 9/30/2022 |
|---|---|---|---|
| Average WTI Price ($/bbl) | $78.63 | $(14.34) (-15.4%) | $92.97 |
| Adjusted Chargeable Costs ($/bbl) | $79.35 | $9.99 (14.4%) | $69.36 |
| Average Production Taxes ($/bbl) | $2.77 | $(1.40) (-33.6%) | $4.17 |
| Average Per Barrel Royalty ($/bbl) | $(3.48) | $(22.92) (-117.9%) | $19.44 |
| Average Net Royalty Production (mb/d) | 65.75 | $(4.08) (-5.8%) | 69.83 |
The decrease in the Average Per Barrel Royalty in 2023 was primarily due to the decline in WTI prices and the increase in Adjusted Chargeable Costs compared to 2022.
Outlook
Based on the SEC-defined 12-month average WTI Price in 2024 of $75.48 per barrel, HNS has estimated that production of the proved reserves would result in no future Royalty Payments to the Trust in 2025 or beyond. The Trust’s termination process is underway, and the Trustee will continue to maintain the $6 million cash reserve to fund the Trust’s expenses until the final distribution to Unit holders, if any.
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