# Marine Petroleum Trust: Form 10-K for the period ended Jun 30, 2024

- Company: [Marine Petroleum Trust](/companies/marps.md) (CIK 62362)
- Form: 10-K
- Filed: 2024-09-30
- Accepted by EDGAR: Sep 30, 2024, 15:15 ET
- Period: 2024-06-30
- Accession: 0000950170-24-110332
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/62362/000095017024110332/marps_10-k_2024-06-30.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/62362/000095017024110332/

## Business

As filed, 9,595 characters.

*Organization*. Marine Petroleum Trust (the “Trust”) is a royalty trust that was created in 1956 under the laws of the State of Texas. Effective February 20, 2018, Simmons Bank (“Simmons”) became corporate trustee of the Trust as a result of a merger between Simmons and Southwest Bank, the former corporate trustee of the Trust. On November 4, 2021, Simmons announced that it had entered into an agreement with Argent Trust Company, a Tennessee chartered trust company (the “Trustee”), pursuant to which Simmons would resign as trustee of the Trust and nominate Argent Trust Company as successor trustee of the Trust. The change in trustee from Simmons to Argent Trust Company was effective on December 30, 2022.

The Trust is not permitted to engage in any business activity because it was organized for the sole purpose of providing an efficient, orderly and practical means for the administration and liquidation of rights to payments from certain oil and natural gas leases in the Gulf of Mexico, pursuant to license agreements and amendments between the Trust’s predecessors and Gulf Oil Corporation (“Gulf”). As a result of various transactions that have occurred since 1956, these interests were largely held by Chevron Corporation (“Chevron”) and are now predominately held by its assignees, including Arena Energy, LP (“Arena,” and collectively with Chevron and its assignees, the “Interest Owners”). The Trust holds title to interests in properties that are situated offshore of Texas.

The Indenture provides that the corporate trustee is to distribute all cash in the Trust, less an amount reserved for the payment of accrued liabilities and estimated future expenses, to unitholders of record on the last business day of February, May, August and November. Payments are to be made on the 28th day of September, December, March and June of each fiscal year. If the 28th falls on a Saturday, Sunday or legal holiday, the distribution is payable on the next succeeding business day.

The Indenture prohibits the operation of any kind of trade or business by the Trust and also provides that the term of the Trust will expire on June 1, 2041, unless extended by the vote of the holders of a majority of the outstanding units of beneficial interest.

Effective October 19, 2017, Simmons First National Corporation (“SFNC”) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank. SFNC is the parent of Simmons. SFNC merged Southwest Bank, the former corporate trustee of the Trust, with Simmons effective February 20, 2018. Effective December 30, 2022, Argent Trust Company succeeded Simmons as the corporate trustee of the Trust following Simmons resignation as trustee. The defined term “Trustee” as used herein shall refer to Simmons for periods on and after February 20, 2018 through December 29, 2022, and to Argent Trust Company for periods on and after December 30, 2022.

The Trust’s wholly owned subsidiary, Marine Petroleum Corporation (“MPC,” and collectively with the Trust, “Marine”), holds title to interests in properties that are situated offshore of Louisiana, because at the time the Trust was created, trusts could not hold these interests under Louisiana law. Ninety-eight percent of all oil, natural gas, and other mineral royalties collected by MPC, less the receiving and collection costs, are retained by and delivered to the Trust. MPC retains the remaining two percent of the overriding royalties along with other items of income and expense until the board of directors declares a dividend out of the corpus. MPC, like the Trust, is prohibited from engaging in a trade or business and only takes those actions that are necessary for the administration and liquidation of its properties. Marine’s only industry segment or purpose is the administration and collection of royalties.

*Royalties*. Marine’s rights are generally referred to as overriding royalty interests in the oil and natural gas industry, and are sometimes referred to as overriding royalty interests in this Annual Report on Form 10-K. An overriding royalty interest is created by an assignment by the owner of a working interest in an oil or natural gas lease. All production and marketing functions are conducted by the working interest owners of the leases. Income from overriding royalties is paid to Marine either (i) on the basis of the selling price of oil, natural gas and other minerals produced, saved or sold, or (ii) at the value at the wellhead as determined by industry standards, when the selling price does not reflect the value at the wellhead.

Marine holds an overriding royalty interest equal to three-fourths of 1% of the value at the well of any oil, natural gas, or other minerals produced and sold from the leases described in the “Properties” section below. Marine’s overriding royalty interest applies only to existing leases and does not apply to new leases that the Interest Owners may acquire.

Marine also previously owned a 32.6% interest in Tidelands Royalty Trust “B” (“Tidelands”), a separate Texas trust. Tidelands was a reporting company under the Securities Exchange Act of 1934, as amended. On March 8, 2019, Tidelands terminated the registration of its units under Section 12(g) of the Exchange Act, and suspended its reporting obligations under Section 13(a) of the Exchange Act. As of that date, Tidelands’ obligations to file certain reports with the SEC, including annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K, respectively, were automatically and immediately suspended. The term of Tidelands expired in 2021. Tidelands has been wound up and declared January 31, 2022 as the record date for the final distribution which was paid in February 2022.

As of the date of filing of this Annual Report on Form 10-K, the leases subject to Marine’s interests cover an aggregate of 87,326 gross acres. These leases will remain in force until the leases terminate or expire pursuant to their respective terms. Leases may be voluntarily released by the working interest owner after oil and natural gas reserves are produced. Leases may also be abandoned by the working interest owner due to the failure to discover and produce sufficient reserves to make development economically worthwhile. In addition, the U.S. federal government may terminate a lease if the working interest owner fails to develop a lease once it is acquired.

For the fiscal year ended June 30, 2024, approximately 99% of Marine’s royalty revenues were attributable to the sale of oil and approximately 1% of Marine’s royalty revenues were attributable to the sale of natural gas. The royalty revenues received by Marine are affected by a number of factors, including seasonal fluctuations in demand, the ability of wells to produce due to depletion and changes in the market prices for oil and natural gas. The following table presents the percentage of royalties received from various working interest owners, which account for the royalties received in each of the past three years.

| Company | Fiscal Year Ended June 30, 2024 | 2023 | 2022 |
| --- | ---: | ---: | ---: |
| Arena Energy, LP | 100% | 99% | 99% |
| Chevron USA, Inc. | 0% | 1% | 0% |
| Walter Oil & Gas Corporation | 0% | 0% | 1% |
|  | 100% | 100% | 100% |

Marine received $93,134 as a final distribution from Tidelands during the fiscal year ended June 30, 2022.

Marine derives no revenues from foreign sources and has no export sales.

*Trust Functions*. The Trust is administered by officers and employees of its Trustee. The Trust has no employees. See “*Item 10. Directors, Executive Officers and Corporate Governance.”*

All aspects of Marine’s operations are conducted by third parties. These operations include the production and sale of oil and natural gas and the calculation of royalty payments to Marine, which are conducted by oil and natural gas companies that lease tracts subject to Marine’s interests. Equiniti Trust Company LLC is the transfer agent for Marine and is responsible for reviewing, processing and paying distributions.

The ability of Marine to receive revenues is entirely dependent upon its rights with respect to the leases held by the Interest Owners in the Gulf of Mexico (as more fully described in “*Item 2. Properties”* below). Moreover, no revenues are payable to Marine until sales of production commence from any such lease.

The royalty interests held by Marine are depleting with each barrel of oil and cubic foot of natural gas produced. No funds are reinvested by Marine; thus, these depleting assets are not being replaced.

*Widely Held Fixed Investment Trust Reporting Information.* The Trustee assumes that some units of beneficial interest are held by middlemen, as such term is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint owners and brokers holding an interest for a customer in street name). Therefore, the Trustee considers the Trust to be a widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. Accordingly, the Trust will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT. The Trustee that will provide the required information and the contact information for the Trustee is as follows:

Argent Trust Company

3838 Oak Lawn Avenue, Suite 1720

Dallas, Texas 75219

Telephone number: (855) 588-7839

Each unitholder should consult its own tax advisor for compliance with U.S. federal income tax laws and regulations.

## Risk factors

As filed, 21,425 characters.

Although various risk factors and specific cautionary statements are described elsewhere in this Annual Report on Form 10-K, the following is a summary of the principal risks that we believe to be most material to the Trust and to an investment in units of the Trust. The following discussion of risks is not exclusive and is designed to highlight what we believe are the material factors to consider when evaluating its business or an investment in units of the Trust. Additional risks and uncertainties not presently known to us or that we currently deem immaterial could also adversely affect the Trust or an investment in units of the Trust.

### Risks related to the Trust’s Business and its Industry

***Current and future oil and natural gas prices fluctuate due to a number of uncontrollable factors. Any depression in oil and natural gas prices would result in lower royalty payments to Marine and lower cash distributions to its unitholders.***

Marine’s quarterly distributions are highly dependent upon the prices realized from the sale of oil and natural gas. Any sustained decline in Marine’s distributable income would cause a decrease in the value of cash distributions to its unitholders and could result in Marine being unable to make a cash distribution to its unitholders in one or more quarters, as well as result in a decrease of the market price of the units.

Historically, oil and natural gas prices have been volatile and are likely to continue to be volatile in the future due to factors beyond Marine’s control. These factors include, but are not limited to:

- political conditions worldwide, and in particular, political disruptions, terrorist activities, wars or other armed conflicts in oil producing regions, including the war in Ukraine, and the Israel-Hamas war;
- worldwide economic conditions;
- tariffs;
- weather conditions;
- technological innovation affecting extraction expenses;
- the supply and price of domestic and foreign oil and natural gas;
- the level of consumer demand;
- the price and availability of alternative fuels;
- the proximity to, and capacity of, transportation facilities; and
- the effect of worldwide energy conservation measures.

Moreover, government regulations, such as the regulation of natural gas transportation and price controls, can affect oil and natural gas prices in the long term.

Lower prices may reduce the amount of oil and natural gas that is economical to produce and reduce distributable income available to Marine. As a result, a substantial decline in the production or price of oil and natural gas could result in Marine being unable to make distributions to unitholders in future quarters. The volatility of oil and gas prices reduces the predictability of future cash distributions to unitholders. Substantially all of the oil and natural gas produced from the leases are being sold under short-term or multi-month contracts at market clearing prices or on the spot market.

### Marine is unable to acquire royalty interests in any more leases.

Marine’s overriding royalty interests apply only to existing leases and do not apply to new leases that the Interest Owners may acquire. Therefore, the Interest Owners are no longer obligated to assign any interest to Marine out of any lease that they acquire. In addition, Marine is not permitted to carry on any business, including making investments in additional oil and natural gas interests. Marine will continue to be entitled to receive payments on its existing leases, so long as the leases are active properties. Once the leases terminate or expire, any overriding royalties payable to Marine will terminate and Marine will not be able to acquire any additional or replacement royalty interests.

***Royalty interests are depleting assets and may deplete faster than expected or in their entirety.***

The net proceeds payable to Marine are derived from the sale of depleting assets. Accordingly, the portion of the distributions to unitholders that are attributable to depletion may be considered a return of capital as opposed to a return on investment. Distributions that are considered a return of capital will ultimately diminish the depletion tax benefits available to unitholders, which could reduce the market value of the units over time.

The reduction in proved reserve quantities is a common measure of depletion. Future maintenance and development projects on the leases will likely affect the quantity of proved reserves. The timing and size of these projects will depend on the market prices of oil and natural gas. If operators of the leases do not implement additional maintenance and development projects, the future rate of production decline of proved reserves may be higher than the rate currently experienced by Marine. Eventually, the properties in the leases will stop producing in commercial quantities, and Marine will cease to be entitled to receive any distributions of net proceeds therefrom.

***The spread of a pandemic, such as coronavirus (“COVID-19”) and its variants, and measures taken to mitigate the impact of such a pandemic could have an adverse effect on trust distributions.***

The spread of a pandemic such as COVID-19, and the continually changing measures taken to mitigate the impact of such a pandemic, could have an adverse effect on the demand for oil and natural gas and the business and operations of the operators of the properties, which in turn could have an adverse effect on trust distributions.

***The operators of the oil and natural gas leases are subject to extensive governmental regulation.***

Oil and natural gas operators have been, and in the future will be, affected by Federal, state and local laws and regulations and other political developments, such as price or gathering rate controls, drilling regulations, and environmental protection regulations, including the regulation of hydraulic fracturing. Although Marine is unable to predict changes to existing laws and regulations, such changes could significantly impact Marine’s overriding royalty interests.

***The owner of any properties in the leases may transfer any of the properties to another unrelated third party, which could reduce the amount of royalty payments that are received.***

The working interest owners may at any time transfer all or part of the property in a lease to another unrelated third party. Unitholders are not entitled to vote on any transfer, and Marine will not receive any proceeds of any such transfer. Following any transfer, the lease will continue to be subject to Marine’s royalty interest, but the net proceeds from the transferred property would be calculated separately and paid by the transferee. The transferee would be responsible for all of the obligations relating to calculating, reporting and paying to Marine its royalty interest on the transferred portion of the lease, and the transferor of the transferred property would have no continuing obligation to Marine for that property. Any such transferee may not be as financially sound as the current working interest owner.

***The owner of any properties in the leases may abandon any property, terminating the related royalty interest Marine may hold.***

The current working interest owners or any transferee may abandon any well or property that is subject to Marine’s royalty interest if it believes that the well or property can no longer produce in commercially economic quantities or for any other reason. This would terminate Marine’s royalty interest relating to the abandoned well or property.

***The Trustee, Marine and the Trust’s unitholders do not control the operation or development of the properties in the leases and have little influence over their operation or development.***

The Trustee, Marine and the Trust’s unitholders have little, if any, influence or control over the operation or future development of the underlying properties of the leases. The properties underlying the leases are owned by independent working interest owners. The working interest owners manage the underlying properties and handle the receipt and payment of funds relating to the leases and payments to Marine for its royalty interests. The current working interest owners are under no obligation to continue operating the properties. The failure of a working interest owner to conduct its operations, discharge its obligations, cooperate with regulatory agencies or comply with laws, rules and regulations in a proper manner could have an adverse effect on net proceeds payable to Marine. The Trustee, Marine and the Trust’s unitholders do not have the right to replace a working interest owner.

### Risks Related to the Units

***The market price for the units may not reflect the value of the royalty interests held by Marine.***

The public trading price for the units tends to be tied to the recent and expected levels of cash distributions on the units. The amounts available for distribution by Marine vary in response to numerous factors outside of Marine’s control, including prevailing prices for oil and natural gas produced from properties on the leases. The market price of the units is not necessarily indicative of the value that Marine would realize if it sold its interest in the properties on the leases to a third-party buyer and distributed the net proceeds to its unitholders. In addition, the market price of the units is not necessarily reflective of the fact that Marine’s assets are depleting assets, and a portion of each cash distribution paid on the units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. There is no guarantee that distributions made to a unitholder over the life of these depleting assets will equal or exceed the purchase price paid by the unitholder for the unit.

In addition, the public stock markets have traditionally experienced price and trading volume volatility. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons that may or may not be related to operating performance. If the public stock markets continue to experience price and trading volume volatility in the future, the market price of the units could be adversely affected.

***Our units have been thinly traded and an active trading market for our units may not develop.***

The trading volume of our units has historically been low. As a result, sales of small amounts of the units in the public market could cause the price of the units to fluctuate greatly, including in a materially adverse manner. In addition, a more active trading market for our units may not develop, or if it does develop, may not continue, and a unitholder may find it difficult to dispose of, or to obtain accurate quotations as to the market value of, our units.

***Operating risks for the working interest owners’ interests on the leases can adversely affect distributions.***

The occurrence of drilling, production or transportation accidents and other natural disasters on the properties underlying the leases can reduce distributions. These occurrences include blowouts, cratering, explosions, environmental and hurricane damage that may result in personal injuries, property damage, damage to productive formations or equipment and environmental damages. Any of these occurrences could have a material adverse effect on the amount of our distributions or the market value of the units.

***Failure to collect royalty payments from working interest owners could adversely affect Marine’s distributions to its unitholders.***

A significant portion of Marine’s royalties are attributable to a limited number of working interest owners. For the fiscal year ended June 30, 2024, two working interest owners accounted for 100% of the royalty payments to Marine. Marine does not require working interest owners to pledge collateral or otherwise post security for royalty payments. At any time, Marine may encounter collection issues with one or more of the working interest owners, which could result in Marine not receiving payments for some or all of its royalty interests. Any reduction in royalty payments would reduce the distributable income to Marine’s unitholders.

### Marine’s royalty interest can be sold and the Trust can be terminated.

The Trust may be terminated and the Trustee may sell Marine’s royalty interests if holders of 80% or more of the units of beneficial interest of the Trust approve the sale and vote to terminate the Trust. Following any such termination and liquidation, the net proceeds of any sale would be distributed to the unitholders and the unitholders would receive no further distributions from the Trust. Any such sale may not be on terms acceptable or favorable to all unitholders.

***Important reserve and other information with respect to the particular leases subject to Marine’s royalty interest is unreasonably difficult to obtain.***

The leasehold working interests that are subject to the rights held by Marine are owned, in most cases, in whole or in part by Arena, or other oil and natural gas exploration and production companies. Certain information with respect to the particular leases subject to Marine’s interests, including, but not limited to, (i) reserves, (ii) the availability of oil and natural gas, (iii) the average production cost (lifting cost) per unit, (iv) undeveloped acreage and (v) net wells and net acres, lies solely within the knowledge of these working interest owners. Marine does not have access to engineering data regarding these leaseholds and believes that such information would have been compiled principally by or for the working interest owners of these leaseholds and such information is unreasonably difficult for Marine to obtain.

***The Trustee may be subject to attempted cybersecurity disruptions from a variety of sources including state-sponsored actors.***

The Trustee maintains cybersecurity protocols to secure sensitive, non-public information. If the measures taken to protect against cybersecurity disruptions prove to be insufficient or if proprietary data is otherwise not protected, the Trustee or customers, employees, or third parties could be adversely affected. The Trust is also exposed to potential harm from cybersecurity events that may affect the operations of third-parties, including suppliers, service providers (including providers of cloud-hosting services for our data or applications), and customers. Cybersecurity disruptions could cause harm to people or the environment; damage or destroy assets; compromise business systems; result in proprietary information being altered, lost, or stolen; result in employee, customer, or third-party information being compromised; or otherwise disrupt business operations. The Trust could incur significant costs to remedy the effects of a major cybersecurity disruption in addition to costs in connection with resulting regulatory actions, litigation, or reputational harm. As a result, such costs could decrease the Trust’s distributions to its unitholders.

***Terrorism and continued geopolitical hostilities, including the war in Ukraine and the war between Israel and Hamas, could adversely affect Marine’s distributions to its unitholders or the market price of its units.***

Terrorist attacks and the threat of terrorist attacks, whether domestic or foreign, as well as military or other actions taken in response to such attacks or threats, could cause instability in the global financial, oil and natural gas markets. Terrorism and other geopolitical hostilities, including the war in Ukraine and the war between Israel and Hamas, could adversely affect the Trust’s distributions to its unitholders or the market price of its units in unpredictable ways, including through the disruption of oil and natural gas supplies and markets, increased volatility in oil and natural gas prices, or the possibility that the infrastructure on which the operators of the underlying properties rely could be a direct target or an indirect casualty of an act of terror.

### Unitholders have limited voting rights.

Voting rights as a unitholder are more limited than those of stockholders of most public corporations. For example, there is no requirement for annual meetings of unitholders or for an annual or other periodic re-election of the Trustee. Unlike corporations, which are generally governed by boards of directors that are elected by their equity holders, the Trust is administered by a corporate trustee in accordance with the Indenture and other organizational documents. The Trustee has extremely limited discretion in its administration of the Trust.

### The limited liability of the unitholders is uncertain.

The unitholders are not protected from the liabilities of the Trust to the same extent that a shareholder would be protected from a corporation’s liabilities. The structure of the Trust as a trust does not include the interposition of a limited liability entity, such as a corporation or limited partnership, which would provide further limited liability protection to unitholders. While the Trust is liable for any excess liabilities incurred if the Trustee fails to ensure that such liabilities are to be satisfied only out of the Trust’s assets, under the laws of the State of Texas, which are unsettled on this point, a unitholder may be jointly and severally liable for any liability of the Trust if (i) the satisfaction of such liabilities was not contractually limited to the assets of the Trust and (ii) the assets of the Trust and the Trustee are not adequate to satisfy such liability. As a result, unitholders may be exposed to personal liability.

***Cash held by the Trustee is not insured by the Federal Deposit Insurance Corporation.***

Currently, cash held by Marine that is reserved for the payment of accrued liabilities and estimated future expenses and distributions to unitholders is typically held in cash deposits, U.S. Treasury and agency bonds and money market accounts. Marine places such reserve cash with financial institutions that Marine considers credit worthy and limits the amount of credit exposure from any one financial institution. However, none of these accounts are insured by the Federal Deposit Insurance Corporation. In the event that any such financial institution becomes insolvent, Marine may be unable to recover any or all such cash from the insolvent financial institution. Any loss of such cash may have a material adverse effect on Marine’s cash balances and any distributions to unitholders.

***Financial information of Marine is not prepared in accordance with generally accepted accounting principles in the United States.***

The financial statements of Marine are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting that differs from generally accepted accounting principles in the United States (“GAAP”). Although the modified cash basis of accounting is permitted for royalty trusts by the U.S. Securities and Exchange Commission (the “SEC”), the financial statements of Marine differ from financial statements prepared in accordance with GAAP because royalty income is recognized in the month it is received rather than in the month of production, expenses are recorded in the month paid rather than in the month incurred and reserves may be established for contingencies that would not be recorded under GAAP.

***If Marine becomes subject to the Texas franchise tax, the Trustee may have to withhold amounts from future distributions to pay the tax liability.***

The State of Texas imposes a franchise tax that applies to most business entities doing business in Texas. Trusts, however, other than business trusts (as defined in U.S. Treasury Regulation section 301.7701-4(b)), that meet certain statutory requirements are exempt from the franchise tax as “passive entities.”

The Trustee does not expect that the Trust will be required to pay any amounts under the Texas franchise tax for the 2024 tax year based on the Trustee’s belief that the Trust is exempt from the franchise tax as a passive entity (*i.e.*, the Trust is not a business trust, it receives at least 90% of its federal gross income from certain passive sources, and no more than 10% of its income is derived from an active trade or business). If it is subsequently determined that the Trust is not exempt from the franchise tax, the Trust will be required to reduce distributions by the amount required to satisfy and pay the Trust’s franchise tax liability for the years for which the applicable statute of limitations has not yet expired. In addition, the Trust would be required to timely pay franchise tax liability due with respect to current and future years in which the Trust fails to qualify for an exemption and has total revenues in excess of the applicable no tax due threshold, which is currently $2,470,000.

If the Trust is exempt from the Texas franchise tax as a passive entity, each unitholder that is subject to the Texas franchise tax as a taxable entity under the Texas Tax Code should generally include its share of the Trust’s revenue in its franchise tax computation. The Texas franchise tax does not apply to natural persons. Each unitholder is urged to consult its own tax advisor regarding its possible Texas franchise tax liability.

## Properties

As filed, 8,830 characters.

*General*. Marine is not engaged in oil and natural gas exploration or production operations, and its only industry segment or purpose is the administration and collection of royalties. Marine’s income is based upon the oil and natural gas operations of third parties. Marine’s income is derived from contracts that provide for payments in the nature of overriding royalties made to Marine based on oil and natural gas sales from certain leases in the Gulf of Mexico. Marine does not own or directly lease any physical properties.

*Reserves*. As indicated above, Marine is not engaged in the exploration or production of oil or natural gas. Marine’s income is derived from overriding royalty payments that are carved out of working interests in oil and natural gas leases in the Gulf of Mexico. Marine does not have the engineering data necessary to make an estimate of the proved oil and natural gas reserves attributable to such working interests (nor the present value of future net cash flows from such reserves), and Marine is not entitled to receive such data from the owners of the working interests from which its interests are derived. See also “—*Difficulty in Obtaining Certain Data.”* Since Marine does not have access to this reserve information, Marine is unable to compute the standardized measure of discounted future net cash flows attributable to such working interests.

Marine did not file any reports during the fiscal year ended June 30, 2024 with any U.S. Federal authority or agency with respect to oil and natural gas reserves.

Due to the nature of Marine’s business, it does not have any delivery commitments.

*Production*. The following table includes information regarding the net quantities of oil, natural gas, and natural gas liquids sold with respect to Marine’s overriding royalty interests for each of the last three fiscal years, as well as the average sales price per unit of oil, natural gas, and natural gas liquids sold upon which payments to Marine are based. In previous years, the natural gas liquids revenue was included with the natural gas revenue and natural gas pricing was calculated based on the combined revenue but the calculation did not include the natural gas liquid quantities sold. The information in the table was revised for fiscal years 2023 and 2022 to conform with the current year presentation to (i) provide for natural gas liquids quantities sold and average sales price for natural gas liquids and (ii) correct average sales price for natural gas for fiscal years 2023 and 2022 and correct natural gas quantities sold for 2022. These changes do not impact the prior years financial statements or distributable income.

| Net quantities sold: | Fiscal Year Ended June 30, 2024 | 2023 | 2022 |
| --- | ---: | ---: | ---: |
| Oil (in barrels \[“bbls”\]) | 12,805 | 16,817 | 16,096 |
| Natural gas (in thousands of cubic feet \[“mcf”\]) | 11,399 | 12,712 | 6,561 |
| Natural gas liquids (in thousands of cubic feet \[“mcf”\]) | 20,339 | 22,152 | 95,461 |
| **Average sales price for royalty oil and natural gas sold:** |  |  |  |
| Oil (per bbl) (1) | $76.54 | $90.59 | $78.23 |
| Natural gas, net of expenses (per mcf) (1) | $0.92 | $5.59 | $5.73 |
| Natural gas liquids, net of expenses (per mcf) (1) | $0.16 | $0.69 | $0.54 |

8

(1) The average sales price is calculated from data provided by the operators.

Information about average production cost (lifting cost) per unit of production has been omitted due to its unavailability and inapplicability to Marine. For more recent information regarding prices, see “*Item 7. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.”*

*Productive Wells*. Marine has performed a review of public records from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM), a division of the U.S. government, and Marine's revenue records provided by the operators. Based on this information, Marine believes there are approximately 75 gross active wells subject to Marine’s interests. Marine believes that the term “active wells” is synonymous with the term “productive wells” as defined in Item 1205 of Regulation S-K. While Marine believes that most of the active wells produce both oil and natural gas, Marine is unable to determine the actual number of wells classified as either oil or natural gas wells without unreasonable effort and expense. See “*Difficulty in Obtaining Certain Data.”*

*Drilling Activity*. Based on information from BOEM, revenue records from remitters received by Marine, and other information from a third-party, which has access to records from other public sources, Marine believes there were five wells drilled or recompleted in which Marine had an interest during the fiscal year 2023 . Using these same sources, the Trust believes there were nine wells drilled or recompleted in which Marine had an interest during fiscal year 2024.

Information regarding net wells or acres is not included since Marine does not own any working interests.

*Lease Acreage*. Marine has performed a review of the public records from BOEM and Marine's revenue records provided by the operators. Based on this information, Marine believes that as of June 30, 2024, Marine had an overriding royalty interest in 19 different oil and natural gas leases covering an aggregate of 87,326 gross acres. The lease acreage is all located in federal waters in the Central and Western areas of the Gulf of Mexico off the coasts of Louisiana and Texas.

Leases are typically granted for a term of five years, during which the lease owner must establish commercial production, or the lease expires. Marine’s overriding royalty area is determined by a contract that defines the area in which Marine is entitled to receive a royalty interest. In some cases, that area does not cover an entire lease block. In those cases, Marine’s royalty interest only applies to the area that lies within the lease. Of the aggregate of 87,326 total gross acres in which Marine has an overriding royalty interest, there are 210 gross acres located on leases that have commercial production, but the production is not on Marine’s overriding royalty area within those leases.

The overriding royalty interest owned by Marine is three-fourths of 1% of the working interest held by the Interest Owners. The fractional interest therefore varies from lease to lease. The acreage weighted average of the fractional interest in all leases is 0.6607%. The following table presents the acreage breakdown by fractional interests of Marine based on information available to the Trustee:

| Trust | Gross Acres | Interest |
| --- | ---: | ---: |
| Marine | 72,358 | 0.7500% |
| Marine | 10,000 | 0.2500% |
| Marine | 4,968 | 0.1875% |
| **Summary** | **87,326** | **0.6607%** |

*Present Activities*. Based upon review of public records available to the Trust, Marine believes that as of June 30, 2024, operators had designated six locations for additional operations, which may include drilling, permits to work over or recomplete a well, or other types of operations. There is no assurance that wells will be drilled, and if they are drilled, they will be successful. Marine is not obligated to provide any fixed and determinable quantities of oil or natural gas in the future under any existing contracts or agreements. Marine will not necessarily be updated on the status of any of the development activities beyond what can be found in the public records available to Marine.

*Difficulty in Obtaining Certain Data*. Marine’s only activities are the collection and distribution of revenues from overriding royalties on certain oil and natural gas leases in the Gulf of Mexico, pursuant to purchase agreements between Marine’s predecessors and Gulf and its transferees. The leasehold working interests that are subject to the rights held by Marine are owned, in most cases, in whole or in part by Chevron, or other oil and natural gas exploration and production companies. Certain information with respect to the particular leases subject to Marine’s interests, including, but not limited to, (i) reserves, (ii) the availability of oil and natural gas, (iii) the average production cost (lifting cost) per unit, (iv) undeveloped acreage and (v) net wells and net acres, lies solely within the knowledge of these working interest owners. Marine does not have access to engineering data regarding these leaseholds and believes that such information would have been compiled principally by or for the working interest owners of these leaseholds, and that such information is unreasonably difficult for Marine to obtain. As a result, Marine believes that unreasonable efforts and expense would be involved in seeking to obtain all of the information required under Item 102 and Subpart 1200 of Regulation S-K.

## Legal proceedings

As filed, 169 characters.

To their knowledge, neither the Trust nor MPC, nor any of their respective properties, is a party to or subject to any material pending litigation as of the date hereof.

## Management's discussion and analysis

As filed, 14,838 characters.

*Critical Accounting Policies*. The financial statements of Marine have been prepared on the modified cash basis method and are not intended to present Marine’s financial position and results of operations in conformity with GAAP. Under the modified cash basis method:

- Royalty income is recognized when received by Marine.
- Marine’s expenses (which include accounting, legal, and other professional fees, Trustees’ fees and out-of-pocket expenses) are recorded on an actual paid basis. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary.
- Distributions to unitholders are recognized when declared by the Trustee of the Trust.

The financial statements of Marine differ from financial statements prepared in conformity with GAAP because of the following:

- Royalty income is recognized in the month received rather than in the month of production.
- Reserves may be established for certain contingencies that would not be recorded under GAAP.
- Expenses are recorded in the month paid rather than in the month incurred.
- Depletion is not recorded.

This comprehensive basis of accounting corresponds to the accounting principles permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

The preparation of financial statements in conformity with the modified cash basis method of accounting requires the Trustee to make various estimates and assumptions that affect the reported amount of liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results may differ from such estimates.

*Revenue Recognition*. In May 2014, the FASB issued updated guidance for recognizing revenue from contracts with customers. This update amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods and services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services and revenue streams related solely to oil and gas royalties. The Trust adopted the disclosure standards of this update, as required, beginning with the first quarter of fiscal year 2019. The adoption of this standard has not had a significant impact on its financial statements due to the modified cash basis of reporting used by the Trust.

Effective October 19, 2017, SFNC completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank. SFNC is the parent of Simmons. SFNC merged Southwest Bank, the former corporate trustee of the Trust, with Simmons effective February 20, 2018. Effective December 30, 2022, Argent Trust Company succeeded Simmons as the corporate trustee of the Trust following Simmons resignation as trustee. The defined term “Trustee” as used herein shall refer to Simmons for periods on and after February 20, 2018 through December 29, 2022, and to Argent Trust Company for periods on and after December 30, 2022.

*Results of Operations.* Marine’s revenues are derived from the oil and natural gas production activities of third parties. Marine’s revenues and distributions fluctuate from period to period based upon factors beyond Marine’s control, including, without limitation, the number of leases subject to Marine’s interests, the number of productive wells drilled on leases subject to Marine’s interests, the level of production over time from such wells and the prices at which the oil and natural gas from such wells are sold.

Marine’s results of operations are significantly impacted by oil and natural gas prices and the quantity of oil and natural gas production. Oil and natural gas prices have historically experienced significant volatility. Marine is not permitted to manage its commodity price risk through the use of fixed price contracts or financial derivatives.

Marine’s income consists primarily of oil and natural gas royalties and is based on the value at the well of its percentage interest in oil and natural gas sold without reduction for any of the expenses of production. “Value at the well” for oil means the sellers’ selling price at its receiving point onshore, less the cost of transportation from the offshore lease to the onshore receiving point. “Value at the well” for natural gas means the selling price less the cost of compression, dehydration and transportation from the lease to the delivery point of the pipeline transporting the product to market. In general, value at the well is determined on the basis of the selling price of oil, natural gas and other minerals produced, saved and sold, or at wellhead prices determined by industry standards, where the selling price does not reflect value at the well. In the event an agreement is not arms-length in nature, the value is based upon current market prices.

*Summary Review.* In general, Marine receives royalties two months after oil production and three months after natural gas production. The June 2024 distribution of $0.12 per unit increased from the March 2024 distribution of $0.06 per unit. As disclosed in a press release dated August 20, 2024, the September 2024 distribution of $0.09 per unit will be a decrease from the June 2024 distribution of $0.12 per unit.

Marine’s distributable income for fiscal 2024 amounted to $713,165, or $0.36 per unit, as compared to $1,375,417, or $0.69 per unit, in fiscal 2023. Distributions to unitholders are calculated and paid out net of reserve for future expenses, which are estimated by the Trustee on a quarterly basis.

Marine reviewed information available from the BOEM website, revenue records from remitters received by Marine, and other information available from a third-party, which has access to records from other public sources. Based upon this review, the fiscal 2023 data presented below has been revised to reflect the information available to Marine during this review. This revision does not impact the prior years' financial statements or distributable income. The following table shows the number of wells Marine believes were drilled or recompleted on leases in which Marine had an interest and the number of active wells at the end of each of the past two fiscal years.

|  | Fiscal Year Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Wells Drilled or Recompleted (Gross) | 9 | 5 |
| Active Wells (Gross) | 75 | 71 |

13

The fiscal year ended June 30, 2023 has been revised to present the natural gas liquids separately from natural gas. In previous years, the natural gas liquids revenue was included with the natural gas revenue and the average price of natural gas was calculated using the combined revenue number but did not include the natural gas liquids quantities sold. The information in the table was revised for fiscal year 2023 to conform with the current year presentation to (i) provide natural gas liquids royalties, natural gas liquids quantities sold, and average sales price for natural gas liquids, (ii) update natural gas royalties to reflect the split from natural gas liquids royalties (the aggregate amount of natural gas royalties and natural gas liquids royalties is the same as previously reflected for fiscal year 2023 for natural gas royalties) and (iii) corrected average sales price for natural gas. This change does not impact the prior years' financial statements or distributable income. The following table and related discussion and analysis shows the royalty income, the net quantities sold, and the average price received for oil, natural gas, and natural gas liquids during fiscal 2024 and 2023.

| Income from: | Fiscal Year Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Oil royalties | $980,110 | $1,523,617 |
| Natural gas royalties | 10,464 | 71,079 |
| Natural gas liquid royalties | 3,568 | 15,186 |
|  | $994,142 | $1,609,882 |
| **Net quantities sold:** |  |  |
| Oil (bbls) | 12,805 | 16,817 |
| Natural gas (mcf) | 11,399 | 12,712 |
| Natural gas liquids (mcf) | 20,339 | 22,152 |
| **Average price:** |  |  |
| Oil (per bbl) (1) | $76.54 | $90.59 |
| Natural gas, net of expenses (per mcf) | $0.92 | $5.59 |
| Natural gas liquids, net of expenses (per mcf) | $0.16 | $0.69 |

(1) These amounts are net of the cost of transportation from offshore leases to onshore receiving points.

*Fiscal Year 2024 Compared to Fiscal Year 2023*. During fiscal 2024, Marine received approximately 99% of its royalty income from the sale of oil and 1% of its royalty income from the sale of natural gas and natural gas liquids, as compared to approximately 95% of its royalty income from the sale of oil and 5% of its royalty income from the sale of natural gas and natural gas liquids in fiscal year 2023. Income from oil and natural gas royalties in fiscal 2024 decreased approximately 38% from fiscal 2023, primarily due to a decrease in prices realized for oil, natural gas and natural gas liquids in addition to a decrease in production of oil.

Revenue from oil royalties amounted to $980,110 in fiscal 2024, a decrease from the $1,523,617 realized in fiscal 2023. The average price realized for a barrel of oil decreased to $76.54 in fiscal 2024 from the $90.59 realized in fiscal 2023. In fiscal 2024, oil production decreased to 12,805 bbls from the 16,817 bbls sold in fiscal 2023.

Revenue from natural gas royalties amounted to $10,464 in fiscal 2024, a decrease from the $71,079 realized in fiscal 2023. Revenue from natural gas liquids royalties amounted to $3,568 in fiscal 2024, a decrease from $15,186 realized in fiscal 2023. In fiscal 2024, the average price per mcf of natural gas decreased to $0.92, from the $5.59 realized in fiscal 2023. Natural gas liquids average price per mcf was 0.16 in fiscal 2024, a decrease from 0.69 for fiscal 2023. Natural gas production decreased to 11,399 mcf for natural gas and 20,339 mcf for natural gas liquids for fiscal year 2024 from 12,712 mcf for natural gas and 22,152 mcf for natural gas liquids production for fiscal year 2023.

General and administrative expenses for fiscal 2024 amounted to $331,832 an increase from the $273,526 recorded in fiscal 2023, due to an increase in professional fees, investor fees and printing expenses.

*Capital Resources and Liquidity*. The Trust’s Indenture (and the charter and by-laws of MPC) expressly prohibits the operation of any kind of trade or business. Due to the limited purpose of the Trust as stated in the Trust’s Indenture, there is no requirement for capital. Its only obligation is to distribute to unitholders the distributable income actually collected.

As an administrator of oil and natural gas royalty properties, the Trust collects income monthly, pays expenses of administration and disburses all distributable income collected to its unitholders each quarter, less an amount reserved for accrued liabilities and estimated future expenses. Because all of Marine’s revenues are invested in liquid funds pending distribution, Marine does not experience liquidity problems.

Marine’s oil and natural gas properties are depleting assets and are not being replaced due to the prohibition against these investments. These restrictions, along with other factors, allow the Trust to be treated as a non-taxable grantor trust for U.S. Federal income tax purposes. Accordingly, all of Marine’s income and deductions should flow through to its unitholders on a proportionate basis. MPC may owe U.S. Federal (and state) income taxes with respect to its income after deducting statutory depletion. MPC’s income specifically excludes 98% of oil and natural gas royalties collected by MPC, which are retained by and delivered to the Trust in respect of the Trust’s net profits interest.

The Trust does not currently have any long-term contractual obligations, other than the obligation to make distributions to unitholders pursuant to the Indenture. The Trust does not maintain any off-balance sheet arrangements within the meaning of Item 303 of Regulation S-K.

*Forward-Looking Statements.* The statements discussed in this Annual Report on Form 10-K regarding Marine’s future financial performance and results of operations, and other statements that are not historical facts, are forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Marine uses the words "anticipate," "believe," "budget," "continue," “estimate,” “expect,” “intend,” "may," "plan,” or other similar words to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. You should read statements that contain these words carefully because they discuss future expectations, contain projections of Marine’s financial condition, and/or state other “forward-looking” information. Actual results may differ from expected results because of factors, risks and uncertainties including, but not limited to, the following: reductions in prices or demand for oil and natural gas, due to, for example, the COVID-19 pandemic or other pandemics, which might then lead to decreased production or impair Marine’s ability to make distributions; reductions in production due to the depletion of existing wells or disruptions in service, which may be caused by storm damage to production facilities, blowouts or other production accidents, or geological changes such as cratering of productive formations; changes in regulations; general economic conditions; actions and policies of petroleum producing nations; other changes in domestic and international energy markets; the resignation of the Trustee; and the expiration, termination or release of leases subject to Marine’s interests. Events may occur in the future that Marine is unable to accurately predict, or over which it has no control. If one or more of these uncertainties as well as other risks of which we are not aware materialize, or if underlying assumptions prove incorrect, actual outcomes may vary materially from those contained in the forward-looking statements included in this Annual Report on Form 10-K. Except as required by applicable securities laws, Marine does not undertake any obligation to update or revise any forward-looking statements.

*Website.* Marine has an Internet website and has made available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, at www.marps-marine.com. Each of these reports will be posted on this website as soon as reasonably practicable after such report is electronically filed with or furnished to the SEC.

## Market risk

As filed, 1,299 characters.

As described elsewhere herein, Marine’s only function is to collect overriding royalties from leases operated by others and distribute those royalties to unitholders after paying the cost of collection and administration. Marine’s income is highly dependent on the prices realized from the sale of oil and natural gas and the quantities of production from wells in which it has a royalty interest. Oil and natural gas prices have historically experienced significant volatility. Marine is not permitted to manage its commodity price risk through the use of fixed price contracts or financial derivatives.

Due to the short length of time between receipts and disbursements, cash held by the Trust is held in a non-interest bearing trust account, and there is no material interest rate risk. Oil and natural gas royalties received by MPC prior to delivery of the 98% net profits interest to the Trust are held in money market accounts that invest in U.S. Treasury securities and are considered not subject to interest rate risk. The corpus of MPC is held in either money market accounts or U.S. Treasury or agency securities that are held to maturity. Funds held in money market accounts and U.S. Treasury securities that mature in less than one year are considered not subject to interest rate risk.

## Controls and procedures

As filed, 1,847 characters.

#### Effectiveness of Disclosure Controls and Procedures

As of June 30, 2024, the Trustee carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, the Trustee concluded that Marine’s disclosure controls and procedures were effective as of June 30, 2024.

#### Changes in Internal Control Over Financial Reporting

There have not been any changes in Marine’s internal control over financial reporting during the fourth quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, Marine’s internal control over financial reporting.

#### Trustee’s Report on Internal Control Over Financial Reporting

The Trustee is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act. The Trustee conducted an evaluation of the effectiveness of Marine’s internal control over financial reporting based on the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Trustee’s evaluation under the “Internal Control-Integrated Framework,” the Trustee concluded that Marine’s internal control over financial reporting was effective as of June 30, 2024. This Annual Report on Form 10-K does not include an attestation report of Marine’s registered public accounting firm regarding internal control over financial reporting since the Trustee’s report was not subject to attestation by Marine’s registered public accounting firm pursuant to an exemption for smaller reporting companies pursuant to Section 404(c) of the Sarbanes-Oxley Act of 2002.

Filed Sep 30, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-110332. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.