-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qv4FeEsrvfOr4rF3KQV+pgp+75DWzkpdAN7L8XaoydzqSt6WSze/Ymm5fjvNsZgP YT0SE9oTURDGMivFLoGp0Q== 0000889812-99-003353.txt : 19991117 0000889812-99-003353.hdr.sgml : 19991117 ACCESSION NUMBER: 0000889812-99-003353 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BP PRUDHOE BAY ROYALTY TRUST CENTRAL INDEX KEY: 0000850033 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 136943724 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10243 FILM NUMBER: 99752007 BUSINESS ADDRESS: STREET 1: C/O BANKOF NEW YORK STREET 2: 101 BARCLAY ST., 21ST FLOOR WEST CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 2128155084 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------- FORM 10-Q /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 ------------------ 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 Organization) Identification No.) The Bank of New York, 101 Barclay Street, New York, NY 10286 - ------------------------------------------------------ ---------- (Address of Principal Executive Office of Trustee) (Zip Code) Trustee's Telephone Number, Including Area Code: (212) 815-5092 -------------- 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 / / As of November 10, 1999, 21,400,000 Units of Beneficial Interest were outstanding. PART I FINANCIAL INFORMATION Item 1. Financial Statements. BP PRUDHOE BAY ROYALTY TRUST Statements of Assets, Liabilities and Trust Corpus (In thousands, except unit data) September 30, 1999 December 31, (Unaudited) 1998 ----------- ---- Assets Royalty Interest, net (notes 1, 2 and 3) $23,223 25,098 Cash 250 13 ------- ------- Total assets $23,473 25,111 ======= ======= Liabilities and Trust Corpus Accrued expenses $ 479 103 Trust Corpus (40,000,000 units of beneficial interest authorized, 21,400,000 units issued and outstanding) 22,994 25,008 ------- ------- Total liabilities and Trust Corpus $23,473 25,111 ======= ======= See accompanying notes to financial statements. 1 BP PRUDHOE BAY ROYALTY TRUST Statements of Cash Earnings and Distributions (In thousands, except unit data) (Unaudited)
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Royalty revenues $ 4,427 1,773 4,427 13,863 Interest Income 13 -- 13 17 Refund of overpayment of expenses -- -- -- 141 Less: Trust administrative expenses (625) (303) (625) (640) Expense reserve (250) -- (250) -- ------------ ------------ ------------ ------------ Cash earnings $ 3,565 1,470 3,565 13,381 ============ ============ ============ ============ Cash distributions $ 3,565 1,470 3,565 13,381 ============ ============ ============ ============ Cash distributions per unit $ 0.167 0.069 0.167 0.626 ============ ============ ============ ============ Units outstanding 21,400,000 21,400,000 21,400,000 21,400,000 ============ ============ ============ ============
See accompanying notes to financial statements. 2 BP PRUDHOE BAY ROYALTY TRUST Statements of Changes in Trust Corpus (In thousands) (Unaudited)
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 -------- -------- -------- -------- Trust Corpus at beginning of period $ 22,975 220,672 25,008 242,829 Change in cash balance 237 -- 237 -- Cash earnings 3,565 1,470 3,565 13,381 Decrease /(Increase) in accrued expenses 410 222 (376) 86 Cash distributions (3,565) (1,470) (3,565) (13,381) Amortization of Royalty Interest (628) (11,194) (1,875) (33,215) -------- -------- -------- -------- Trust Corpus at end of period $ 22,994 209,700 22,994 209,700 ======== ======== ======== ========
See accompanying notes to financial statements. 3 BP PRUDHOE BAY ROYALTY TRUST Notes to Financial Statements September 30, 1999 (Unaudited) (1) Formation of the Trust and Organization BP Prudhoe Bay Royalty Trust (the "Trust"), a grantor trust, was created as a Delaware business trust 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 (The "Trustee") and The Bank of New York (Delaware), as co-trustee. Standard Oil and the Company are indirect wholly owned subsidiaries of the British Petroleum Company p.l.c. ("BP"). During the fourth quarter of 1998, British Petroleum Company p.l.c. merged with Amoco Corporation to form BP Amoco. This transaction should not have a material effect on the Trust's operations. On February 28, 1989, Standard Oil conveyed an overriding 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") as of February 28, 1989, located on the North Slope of Alaska. Trust Unit holders will remain subject at all times to the risk that production will be interrupted or discontinued or fall, on average, below 90,000 barrels per day in any quarter. BP has guaranteed the performance by the Company of its payment obligations with respect to the Royalty Interest. The 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 Per Barrel Royalty in effect for any day is equal to the price of West Texas Intermediate crude oil (the "WTI Price") for that day less scheduled Chargeable Costs (adjusted in certain situations for inflation) and Production Taxes (based on statutory rates then in existence). For years subsequent to 2001, Chargeable Costs will be reduced up to a maximum amount of $1.20 per barrel in each year if additions to the Field's proved reserves do not meet certain specific levels. 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. The Trustee, subject to certain conditions, is obligated to establish cash reserves and borrow funds to pay liabilities of the Trust when they become due. The Trustee may sell Trust properties only (a) as authorized by a vote of the Trust Unit holders, (b) when necessary to provide for the payment of specific liabilities of the Trust then due (subject to certain conditions) or (c) upon termination of the Trust. Each Trust Unit issued and outstanding represents an equal undivided share of beneficial interest in the Trust. Royalty payments are received by the Trust and distributed to Trust Unit holders, net of Trust expenses, in the month succeeding the end of each calendar quarter. The Trust will terminate upon the first to occur of the following events: (a) On or prior to December 31, 2010: upon a vote of Trust Unit holders of not less than 70% of the outstanding Trust Units. 4 BP PRUDHOE BAY ROYALTY TRUST Notes to Financial Statements (Continued) (1) Continued (b) After December 31, 2010: (i) upon a vote of Trust Unit holders of not less than 60% of the outstanding Trust Units, or (ii) at such time the net revenues from the Royalty Interest for two successive years commencing after 2010 are less than $1,000,000 per year (unless the net revenues during such period are materially and adversely affected by certain events). The Trust has no source of liquidity and no capital resources other than the revenue attributable to the Royalty Interest that it receives from time to time. As a result of the severe drop in world oil prices during 1998 and early 1999, the quarterly royalty revenues and cash distributions of the Trust have been significantly reduced. The royalty revenue for the fourth quarter of 1998 that was to be received and recorded in the first quarter of 1999 was zero. The royalty revenue for the first quarter of 1999 that was to be received and recorded in the second quarter of 1999 was also zero. Do to an increase in oil prices in the second quarter, the Trust earned royalty revenue that was recorded in the third quarter. The royalty revenue for the third quarter of 1999 will be received and recorded in the fourth quarter. In order to ensure the Trust has the ability to pay future expenses, the Trust is establishing a cash reserve account over the next several quarters sufficient to pay approximately one year's current and expected liabilities and expenses of the Trust. (2) Basis of Accounting The financial statements of the Trust are prepared on a modified cash basis and reflect the Trust's assets, liabilities, Corpus, earnings and distributions 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 on an accrual basis. (c) Amortization of the Royalty Interest is calculated using the units of production method. Such amortization is charged directly to the Trust Corpus, and does not affect cash earnings. The daily rate for amortization per net equivalent barrel of oil was $0.47 and $8.23 for the nine months ended September 30, 1999 and 1998, respectively. The Trust evaluates impairment of the Royalty Interest by comparing the undiscounted cash flows expected to be realized from the Royalty Interest to the carrying value, pursuant to Statement of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". If the expected future undiscounted cash flows are less than the carrying value, the Trust recognizes an impairment loss for the difference between the carrying value and the estimated fair value of the Royalty Interest. 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, 1999 and December 31, 1998 and the modified cash earnings and distributions and changes in Trust corpus for the three and nine month periods ended September 30, 1999 and 1998. The adjustments are of a normal recurring nature and are, in the opinion of management, necessary to fairly present the results of operations. 5 BP PRUDHOE BAY ROYALTY TRUST Notes to Financial Statements (Continued) (2) Continued Estimates and assumptions are required to be made regarding assets, liabilities and changes in Trust Corpus resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. The financial statements should be read in conjunction with the financial statements and related notes in the Trust's 1998 Annual Report on Form 10-K. The cash earnings and distributions for the interim period presented are not necessarily indicative of the results to be expected for the full year. (3) Royalty Interest The Royalty Interest is comprised of the following at September 30, 1999 (in thousands): Royalty Interest $ 535,000 Less: Accumulated amortization (338,259) Impairment writedown (173,518) --------- $ 23,223 ========= (4) 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 as 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. 6 Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Statement The Trustee, its officers or its agents on behalf of the Trustee may, from time to time, make forward looking statements. To the extent that any forward looking statements are made, the Trustee is unable to predict future changes in oil prices, oil production levels, economic activity, legislation and regulation, and certain changes in expenses of the Trust. In addition, the Trust's future results of operations and other forward looking statements contained in this item and elsewhere in this report involve a number of risks and uncertainties. As a result of variations in such factors, actual results may differ materially from any forward looking statements. Some of these factors are described below. The Trustee disclaims any obligation to update forward looking statements. Liquidity and Capital Resources The Trust is a passive entity, and the Trustee's activities are limited to collecting and distributing the revenues from the Royalty Interest and paying liabilities and expenses of the Trust. Generally, the Trust has no source of liquidity and no capital resources other than the revenue attributable to the Royalty Interest that it receives from time to time. See the discussion under "THE ROYALTY INTEREST" for a description of the calculation of the Per Barrel Royalty, and the discussion under "THE PRUDHOE BAY UNIT - Reserve Estimates" and "INDEPENDENT OIL AND GAS CONSULTANTS' REPORT" in Part I, Item 1 of the Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "Annual Report") for information concerning the estimated future net revenues of the Trust. However, the Trustee does have a limited power to borrow, establish a cash reserve, or dispose of all or part of the Trust Estate, under limited circumstances pursuant to the terms of the Trust Agreement. See the discussion under "THE TRUST" in Part I, Item 1 of the Annual Report. The decline in WTI Prices during the fourth quarter of 1998 and the historically low WTI Prices during the first quarter of 1999 resulted in the Trust not receiving quarterly distributions for the first and second quarters of 1999. The Trustee, therefore, determined to exercise certain of its limited powers under the Trust Agreement to obtain liquidity in order to meet the Trust's future liabilities and expenses. Due to the increases in the WTI Price in the second quarter of 1999, the Trustee has established a cash reserve in order to provide liquidity to the Trust during those periods in which the Trust does not receive a distribution in the future. Given that the Trust did not receive a cash distribution for the first and second quarters of 1999, the Trustee has determined that future political and economic conditions affecting world oil prices may make it impractical from time to time in the future to pay liabilities of the Trust out of quarterly royalty distributions. Accordingly, 7 in July 1999, the Trustee established a cash reserve account. The Trustee anticipates setting aside and adding to such cash reserve account, out of any quarterly distributions received by the Trust, an amount equal to approximately one year's expected liabilities and expenses of the Trust, which the Trustee estimates to be approximately $1,000,000. Such amount would be set aside over the course of at least four quarters, with up to one quarter of such amount being set aside each quarter, assuming the availability of funds from quarterly distributions. The Trustee has set aside $250,000 from the July 15, 1999 distribution and an additional $250,000 from the October 15, 1999 distribution for such cash reserve. The Trustee will draw funds from the cash reserve account during any quarter in which the quarterly distribution received by the Trust does not exceed the liabilities and expenses of the Trust, and will replenish the reserve from future quarterly distributions, if any. Pursuant to the Trust Agreement, amounts set aside for the cash reserve are being invested in U.S. government or agency securities secured by the full faith and credit of the United States. Any such obligation will mature on the next succeeding Quarterly Record Date and will be held to maturity unless there is an earlier default. The Trustee has determined to distribute any interest received from the investment to the holders of Units upon maturity on that next Quarterly Record Date. Should the Trustee not draw upon any or all of the cash reserve to meet the Trust's liabilities and expenses for any given quarter, then the Trustee will re-invest the remaining principal, together with any additional funds set aside that quarter for the cash reserve, in U.S. government securities maturing on the next succeeding Quarterly Record Date. The Trustee anticipates that it will keep this cash reserve program in place until termination of the Trust. In order to establish a cash reserve, certain conditions imposed by the Trust Agreement must be met. See "THE TRUST - Duties and Limited Powers of the Trustee" in Part I, Item 1 in the Annual Report. These conditions include the requirement that the Trustee make certain determinations with respect to the effect on the Trust Estate of the failure to take such action, and the receipt by the Trustee of certain opinions of counsel. At the time of establishing the cash reserve, the Trustee satisfied the requisite conditions imposed by the Trust Agreement. Namely, the Trustee determined that the Trust Estate is subject to the risk of loss or diminution in value should the Trust fail to pay certain future liabilities should WTI Prices decline again in the future. Given the unpredictability of WTI Prices and that the Trust only receives quarterly distributions, the Trustee determined that a cash reserve is necessary to cover any such future liabilities which may exceed those quarterly distributions received by drawing upon the cash reserve. The Trustee has received an opinion of counsel relating to certain tax matters as they pertain to the establishment of the cash reserve. As discussed under CERTAIN TAX CONSIDERATIONS in the Annual Report, amounts received by the Trust as quarterly distributions are income to the holders of the Units, (as will be any earning on investment of the cash reserve) and must be reported by the holders of the Units, even if such amounts are used to repay borrowings or establish a cash reserve and are not received by the holders of the Units. 8 Results of Operations Royalty revenues are generally received on the Quarterly Record Date (generally the fifteenth day of the month) following the end of the calendar quarter in which the related Royalty Production occurred. The Trustee, to the extent possible, pays all expenses of the Trust for each quarter on the Quarterly Record Date on which the revenues for the quarter are received. For the statement of cash earnings and distributions, revenues and Trust expenses are recorded on a cash basis and, as a result, royalties paid to the Trust and distributions to Unit holders in the quarters ended September 30, 1999 and 1998 are attributable to the Company's operations during the quarters ended June 30, 1999 and 1998, respectively. Accordingly, royalties paid to the Trust and distributions to Unit holders in the nine month period ended September 30 of each year are attributable to the Company's operations during the first six months of such year and the last three months of the preceding year. The following table shows the factors employed to compute the Per Barrel Royalty received by the Trust during the quarters ended September 30, 1999 and 1998 (see Note 1 of Notes to Financial Statements in Part I, Item 1). The information in the table has been furnished by the Company.
Quarter Ended Quarter Ended 6/30/99 3/31/99 12/31/98 6/30/98 3/31/98 12/31/97 -------- -------- -------- -------- -------- -------- Average WTI Price $ 17.44 13.08 12.80 14.58 15.96 19.94 -------- -------- -------- -------- -------- -------- Chargeable Costs $ 9.80 9.80 9.30 9.30 9.30 8.85 Cost Adjustment Factor 1.2797 1.2797 1.2797 1.2797 1.2797 1.2797 -------- -------- -------- -------- -------- -------- Adjusted Chargeable Costs $ 12.54 12.54 11.90 11.90 11.90 11.33 Production Taxes 1.79 1.13 1.09 1.36 1.56 2.16 -------- -------- -------- -------- -------- -------- $ 14.33 13.67 12.99 13.26 13.46 13.49 -------- -------- -------- -------- -------- -------- Per Barrel Royalty $ 3.11 (0.59)* (0.19)* 1.32 2.49 6.45 ======== ======== ======== ======== ======== ========
- ---------- * Pursuant to the Conveyance, the payment under the Royalty Interest for any calendar quarter shall not be less than zero. Accordingly, the Per Barrel royalty for the first quarter of 1999 is effectively zero. As long as the Company's average daily net production from the Prudhoe Bay Unit exceeds 90,000 barrels, which the Company currently projects will continue until the year 2009, the only factors affecting the Trust's revenues and distributions to Unit holders are changes in 9 WTI Prices, scheduled annual increases in Chargeable Costs, changes in the Consumer Price Index, changes in Production Taxes and changes in the expenses of the Trust. As a result of the severe decline in the WTI Price during 1998 and the first quarter of 1999 (see "INDUSTRY CONDITIONS" in Part I, Item 1 of the Annual Report), the royalty revenues and cash distributions of the Trust declined significantly throughout 1998 and the first half of 1999. The average daily WTI Price decreased below the level necessary for the Trust to receive a distribution for the fourth quarter of 1998 and the first quarter of 1999. Accordingly, no distribution was made to holders of Units for such quarters. After giving effect to the 1999 increase in Chargeable Costs, the Trust will not be entitled to a quarterly distribution for any quarter during 1999 in which the average daily WTI Price is less than approximately $13.78 (the "break-even point"). From the latter part of March 1999 up to the time of this report, however, the WTI Price has risen and has been above the break-even point and the Trust did receive a distribution for the third quarter of 1999. Although industry experts generally predict that WTI Prices should remain above those historically low levels witnessed in the latter part of 1998 and early 1999, no such assurance can be given. Whether the Trust will be entitled to a quarterly distribution during for the fourth quarter of 1999 depends on WTI Prices prevailing during the remainder of the year. Even if the average daily WTI Price each quarter were to remain above the $13.78 break-even point, there may not be distributions to holders of Units. Quarterly distributions received by the Trust shall, under the terms of the Trust Agreement, first be applied to satisfy the outstanding fees and expenses of the Trust as of each Quarterly Record Date. Due to the fact that none of the fees nor expenses of the Trust incurred from October 1, 1998 through June 30, 1999 had been paid, the Trustee paid approximately $625,000 for the July 1999 Quarterly Record Date to satisfy such accumulated fees and expenses out of the distribution received from the Company on July 15, 1999. Upon paying the Trust's fees and expenses accrued from July 1, 1999 through September 30, 1999 out of the distribution received from the Company on October 15, 1999 and from the interest received on the cash reserve for the prior quarter, the Trustee set aside an additional $250,000 contribution to the cash reserve prior to making the distribution to holders of Units. Three and Nine Months Ended September 30, 1999 Compared to Three and Nine Months Ended September 30,1998 The Trust's royalty revenues in the quarter ended September 30, 1999 increased approximately 250% over revenues in the quarter ended September 30, 1998, primarily as a result 10 of the increase in the Average WTI Price for the quarter ended June 30, 1999, which was higher than the Average WTI Price for the quarter ended June 30, 1998 by $2.86 (a increase of approximately 20%). Revenues in the nine-month period ended September 30, 1999 decreased by approximately 68% over the comparable period ended September 30, 1998 due primarily to the decrease in the Average WTI Price. Total deductions from the Average WTI Price (consisting of Adjusted Chargeable Costs and Production Taxes) increased by $1.07 (approximately 8.1%) from the second quarter of 1998 to the second quarter of 1999. Cash earnings and distributions for the three months ended September 30, 1999 increased by approximately 243% from the three months ended September 30, 1998 due primarily to a increase in the Average WTI Price for the quarter ended June 30, 1999. Cash earnings and distributions for the nine months ended September 30, 1999, however, decreased 73% from the comparable period of 1998 due primarily to a decrease in the Average WTI Prices during the respective periods. These large quarterly fluctuations in cash earnings and distributions have been a result of the highly volatile WTI Prices experienced over the past two years. The Trust Corpus at September 30, 1999 decreased by approximately 89% from September 30, 1998, primarily as a result of an impairment writedown of approximately $174,000,000, which was calculated as the difference between the carrying value and the estimated fair value of the Royalty Interest. The estimated fair value was calculated by projecting future cash flows and discounting them at a current rate that considered the risk inherent in the cash flows. Trust administrative expenses accrued and paid during the quarter ended September 30, 1999 as compared to the quarter ended September 30, 1998 increased by approximately $322,000, or 206%. The increase is due primarily to the facts that (i) the Trustee paid the Trust's fees and expenses which had accrued over a period of three quarters, and (ii) such fees and expenses were unusually high given the increased legal and accounting fees incurred given the Trust's liquidity concerns described above. Year 2000 Problem The Trustee has established a Year 2000 compliance program consisting of, among other things, updating major proprietary application systems and evaluating the Year 2000 compliance efforts of vendors of major vendor-supplied systems and certain other business partners. The Trustee believes that its Year 2000 compliance program is currently on schedule to meet the needs of its customers and the compliance deadlines defined by its regulators. As of December 31, 1998, testing and renovation of the proprietary application systems that the Trustee deems "mission critical" were substantially completed and these systems are currently being used by the Trustee. In addition, all vendor supplied software systems that the Trustee deems mission critical have been tested and, based upon such testing, the Trustee believes that such systems will not be adversely affected in a material way by the date change to the Year 2000. 11 Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of suppliers, customers and other business partners, the Trustee is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Trustee and its ability to perform its obligations under the Trust Agreement. The Year 2000 compliance program is intended to reduce significantly the Trustee's level of uncertainty about the Year 2000 problem and, in particular, the Year 2000 compliance and readiness of the Trustee and its material business partners. The Trustee believes that, with completion of its Year 2000 compliance program as scheduled, the possibility of significant interruption of normal operations should be reduced. However, because of the unprecedented nature of the Year 2000 problem, there can be no certainty as to its impact. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. On October 15, 1999, the Trust received a cash distribution of $9,015,384.71 from the Company with respect to the quarter ended September 30, 1999 and, after adding interest income of $46,598, deducting expenses of $172,623 and setting aside an additional $250,000 for the cash reserve, distributed $8,639,360 or approximately $0.4037 per Unit, to Unit holders of record on October 20, 1999. 13 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 4.1 BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 among The Standard Oil Company, BP Exploration (Alaska) Inc., The Bank of New York, Trustee, and F. James Hutchinson, Co-Trustee. 4.2 Overriding Royalty Conveyance dated February 27, 1989 between BP Exploration (Alaska) Inc. and The Standard Oil Company. 4.3 Trust Conveyance dated February 28, 1989 between The Standard Oil Company and BP Prudhoe Bay Royalty Trust. 4.4 Support Agreement dated as of February 28, 1989 among The British Petroleum Company p.l.c., BP Exploration (Alaska) Inc., The Standard Oil Company and BP Prudhoe Bay Royalty Trust. 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 1999. 14 SIGNATURE 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 By: THE BANK OF NEW YORK, as Trustee By: /s/ Marie E. Trimboli ------------------------------------ Marie E. Trimboli Assistant Treasurer Date: November 12, 1999 The registrant is a trust and has no officers or persons performing similar functions. No additional signatures are available and none have been provided. INDEX TO EXHIBITS Exhibit Exhibit No. Description - ------- ------------------ *4.1 BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 among The Standard Oil Company, BP Exploration (Alaska) Inc., The Bank of New York, Trustee, and F. James Hutchinson, Co-Trustee. *4.2 Overriding Royalty Conveyance dated February 27, 1989 between BP Exploration (Alaska) Inc. and The Standard Oil Company. *4.3 Trust Conveyance dated February 28, 1989 between The Standard Oil Company and BP Prudhoe Bay Royalty Trust. *4.4 Support Agreement dated as of February 28, 1989 among The British Petroleum Company p.l.c., BP Exploration (Alaska) Inc., The standard Oil Company and BP Prudhoe Bay Royalty Trust. **27. Financial Data Schedule. - ---------- * Incorporated by reference to the correspondingly numbered exhibit to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (Commission File No. 1-10243). ** Filed herewith. EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the unaudited financial statements of BP Prudhoe Bay Royalty Trust as of and for the fiscal quarter ended September 30, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 9-MOS DEC-31-1999 DEC-31-1999 SEP-30-1999 SEP-30-1999 250 250 0 0 0 0 0 0 0 0 0 0 23,223 23,223 0 0 23,473 23,473 479 479 0 0 0 0 0 0 22,994 22,994 0 0 23,473 23,473 0 0 4,427 4,427 0 0 0 0 625 625 0 0 0 0 3,565 3,565 0 0 3,565 3,565 0 0 0 0 0 0 3,565 3,565 0.167 0.167 0.167 0.167
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