Pacific Coast Oil Trust (ROYT) Will Not Offer September Cash Distribution
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PACIFIC COAST OIL TRUST (NYSE: ROYT) a perpetual royalty trust formed by Pacific Coast Energy Company LP (“PCEC”), announced today that there will be no cash distribution to the holders of its units of beneficial interest of record on September 7, 2016. The Trust’s distribution calculation relates to net profits and overriding royalties generated during July 2016 as provided in the conveyance of net profits and overriding royalty interest.
The current month’s calculation for the Developed Properties resulted in $585,000 of excess revenues over direct operating expenses and development costs. The current month’s revenues were $3.0 million, lease operating expenses including property taxes were $2.2 million, and capital expenditures were $85,000. Average realized prices for the Developed Properties were $36.79 per Boe in July, as compared to $41.33 per Boe in June. The cumulative net profits deficit of $583,000 for the Developed Properties in the month of June was reduced to zero during the month of July. The Trust will not receive any net profits from the Developed Properties until the indebtedness borrowed from PCEC has been paid in full.
The current month’s calculations included $37,000 for the 7.5% overriding royalty on the Remaining Properties from Orcutt Diatomite and Orcutt Field. Average realized prices for the Remaining Properties were $36.59 per Boe in July, as compared to $39.81 per Boe in June. The cumulative net profits deficit on the Remaining Properties, including the 7.5% overriding royalty payments, increased $24,000 and now totals $2.2 million.
The expected current month shortfall is $69,000, reflecting $88,000 for the monthly operating and services fee payable to PCEC and $20,000 Trust general and administrative expenses, partially offset by $2,000 of current net profits amount from the Developed Properties and $37,000 in proceeds from the 7.5% overriding royalty on the Remaining Properties in July. The expected current month shortfall will be borrowed from PCEC in September 2016 and is expected to increase the cumulative borrowings from PCEC, including interest, to $1,037,000.
PCEC has agreed to loan funds to the Trust necessary to pay such expenses at an interest rate of 8.5% per annum. PCEC previously provided the Trust with a $1 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses as they become due. Any funds provided under the letter of credit or loaned by PCEC may only be used for the payment of current accounts or other obligations to trade creditors in connection with obtaining goods or services or for the payment of other accrued current liabilities arising in the ordinary course of the Trust’s business. No distribution will be made to Trust unitholders until the indebtedness borrowed, including interest thereon, has been paid in full.
Sales Volumes and Prices
The following table displays PCEC’s underlying sales volumes and average prices for the month of July 2016:
|Sales Volumes||Average Price|
|Developed Properties (a)||81,686||$36.79|
|Remaining Properties (b)||15,916||$36.59|
|(a) Crude oil sales represented 93% of sales volumes.|
|(b) Crude oil sales represented 100% of sales volumes.|
Status of the Trust
As oil and natural gas prices continue to be depressed and as we are unable to predict future commodity prices with any greater precision than the futures market, it appears likely that distributions to the Trust will continue to be significantly impacted. The Trust Agreement provides that the Trust will terminate in the event that annual proceeds received by the Trust attributable to the Conveyed Interests (as defined in the Trust Agreement), in the aggregate, are less than $2 million for each of any two consecutive years.
Overview of Trust Structure
Pacific Coast Oil Trust is a perpetual Delaware statutory trust formed by PCEC to own interests in certain oil and gas properties in the Santa Maria Basin and the Los Angeles Basin in California (the “Underlying Properties”). The Underlying Properties and the Trust’s net profits and royalty interests are described in the Trust’s filings with the Securities and Exchange Commission (the “SEC”). As described in the Trust’s filings with the SEC, the amount of any periodic distributions is expected to fluctuate, depending on the proceeds received by the Trust as a result of actual production volumes, oil and gas prices, development expenses, and the amount and timing of the Trust’s administrative expenses, among other factors. For additional information on the Trust, please visit www.pacificcoastoiltrust.com.
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