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MVO > SEC Filings for MVO > Form 10-Q on 8-Nov-2013All Recent SEC Filings

Show all filings for MV OIL TRUST

Form 10-Q for MV OIL TRUST


8-Nov-2013

Quarterly Report


Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the Trust's financial condition and results of operations should be read in conjunction with the financial statements and notes thereto. The Trust's purpose is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect of the net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust units. The Trust derives substantially all of its income and cash flows from the net profits interest.

Results of Operations for the Quarters Ended September 30, 2013 and 2012

The cash received by the Trust from MV Partners during the quarter ended September 30, 2013 substantially represents the production by MV Partners from March 2013 through May 2013. The cash received by the Trust during the quarter ended September 30, 2012 substantially represents the production by MV Partners from March 2012 through May 2012. The revenues from oil production are typically received by MV Partners one month after production. The Trust's net profits interest decreased $2,366,247 to $8,160,926 for the quarter ended September 30, 2013 from $10,527,173 for the quarter ended September 30, 2012. The decrease was primarily due to a $2,957,809 decrease in excess of revenues over direct operating expenses and lease equipment and development costs for the underlying properties to $10,201,158 from $13,158,967 for the prior period. Additionally, the Trustee held back $225,926 for future expenses for the quarter ended September 30, 2013 and $202,173 for the quarter ended September 30, 2012. MV Partners also released and paid to the Trust $600,000 of the reserve for future capital expenses for the quarter ended September 30, 2012, resulting in distributable income of $7,935,000 and $10,925,000 for the quarters ended September 30, 2013 and 2012, respectively.

The Trustee paid general and administrative expenses of $213,041 and $194,041 for the quarters ended September 30, 2013 and 2012, respectively. The distributable income for the quarter ended September 30, 2013 was $7,935,000, a decrease of $2,990,000 from a distributable income of $10,925,000 for the quarter ended September 30, 2012.

The average price received for crude oil sold was $86.70 per Bbl and the average price received for natural gas sold was $3.70 per Mcf for the period from April 1, 2013 through June 30, 2013. The average price received for crude oil sold was $94.76 per Bbl and the average price received for natural gas sold was $2.18 per Mcf for the period from April 1, 2012 through June 30, 2012.

The overall production sales volumes attributable to the net profits interest for the oil and gas production collected during the period from April 1, 2013 through June 30, 2013 were 171,586 Bbls of oil, 13,178 Mcf of natural gas and 539 Bbls of natural gas liquids for a total equivalent barrels of oil of 174,132. The overall production sales volumes attributable to the net profits interest that is for the oil and gas production collected during the period from April 1, 2012 through June 30, 2012 were 181,130 Bbls of oil, 13,093 Mcf of natural gas and 756 Bbls of natural gas liquids for a total equivalent barrels of oil of 183,803.

Results of Operations for the Nine Months Ended September 30, 2013 and 2012

The cash received by the Trust from MV Partners during the nine months ended September 30, 2013 substantially represents the production by MV Partners from September 2012 through May 2013. The cash received by the Trust during the nine months ended September 30, 2012 substantially


represents the production by MV Partners from September 2011 through May 2012. The revenues from oil production are typically received by MV Partners one month after production. The Trust's net profits interest decreased $5,957,229 to $26,365,775 for the nine months ended September 30, 2013 from $32,323,004 for the nine months ended September 30, 2012. The decrease was primarily due to a $7,446,537 decrease in excess of revenues over direct operating expenses and lease equipment and development costs for the underlying properties to $32,957,219 from $40,403,756 for the prior period. Additionally, the Trustee held back $605,775 for future expenses for the nine months ended September 30, 2013 and $473,004 for the nine months ended September 30, 2012. MV Partners also released a net $350,000 of the reserve for future capital expenses for the nine months ended September 30, 2012, resulting in distributable income of $25,760,000 and $32,200,000 for the nine months ended September 30, 2013 and 2012, respectively.

The Trustee paid general and administrative expenses of $705,629 and $735,584 for the nine months ended September 30, 2013 and 2012, respectively. The distributable income for the nine months ended September 30, 2013 was $25,760,000, a decrease of $6,440,000 from a distributable income of $32,200,000 for the nine months ended September 30, 2012.

The average price received for crude oil sold was $85.53 per Bbl and the average price received for natural gas sold was $3.19 per Mcf for the period from October 1, 2012 through June 30, 2013. The average price received for crude oil sold was $90.45 per Bbl while the average price received for natural gas sold was $3.11 per Mcf for the period from October 1, 2011 through June 30, 2012.

The overall production sales volumes attributable to the net profits interest for the oil and gas production collected during the period from October 1, 2012 through June 30, 2013 were 515,351 Bbls of oil, 41,365 Mcf of natural gas and 1,842 Bbls of natural gas liquids for a total equivalent barrels of oil of 523,442. The overall production sales volumes attributable to the net profits interest for the oil and gas production collected during the period from October 1, 2011 through June 30, 2012 were 543,552 Bbls of oil, 35,971 Mcf of natural gas and 2,228 Bbls of natural gas liquids for a total equivalent barrels of oil of 550,995.

Liquidity and Capital Resources

Other than Trust administrative expenses, including any reserves established by the Trustee for future liabilities, the Trust's only use of cash is for distributions to Trust unitholders. Administrative expenses include payments to the Trustee as well as an annual administrative fee to MV Partners pursuant to an administrative services agreement. Each quarter, the Trustee determines the amount of funds available for distribution. Available funds are the excess cash, if any, received by the Trust from the net profits interest and payments from other sources (such as interest earned on any amounts reserved by the Trustee) in that quarter, over the Trust's expenses for that quarter. Available funds are reduced by any cash the Trustee decides to hold as a reserve against future expenses. As of September 30, 2013, $18,000 was held by the Trustee as such a reserve. The Trustee may cause the Trust to borrow funds required to pay expenses if the Trustee determines that the cash on hand and the cash to be received are insufficient to cover the Trust's expenses. If the Trust borrows funds, the Trust unitholders will not receive distributions until the borrowed funds are repaid. During the three and nine months ended September 30, 2013 and 2012, there were no such borrowings. MV Partners has provided a letter of credit in the amount of $1 million to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future expenses.


Income to the Trust from the net profits interest is based on the calculation and definitions of "gross proceeds" and "net proceeds" contained in the conveyance.

As substantially all of the underlying properties are located in mature fields, MV Partners does not expect future costs for the underlying properties to change significantly as compared to recent historical costs other than changes due to fluctuations in the general cost of oilfield services. MV Partners may establish a capital reserve of up to $1.0 million in the aggregate at any given time to reduce the impact on distributions of uneven capital expenditure timing.

The Trust does not have any transactions, arrangements or other relationships with unconsolidated entities or persons that could materially affect the Trust's liquidity or the availability of capital resources.

Note Regarding Forward-Looking Statements

This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Form 10-Q, including without limitation the statements under "Trustee's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. Although MV Partners advised the Trust that it believes that the expectations reflected in the forward-looking statements contained herein are reasonable, no assurance can be given that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from expectations ("Cautionary Statements") are disclosed in this Form 10-Q and in the Trust's Annual Report on Form 10-K for the year ended December 31, 2012, including under the section "Item 1A. Risk Factors". All subsequent written and oral forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

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