PACIFIC COAST OIL TRUST (NYSE:ROYT) (the “Trust”), a 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 December 9, 2019 because
the deficit incurred in the prior months has not yet been fully
recovered, as further discussed below. The Trust’s distribution
calculation relates to net profits and overriding royalties
generated during October 2019 as provided in the conveyance of net
profits and overriding royalty interest. All information in this
press release has been provided to the Trustee by PCEC.
The current month’s calculation for the Developed Properties
resulted in $38,000 of direct operating revenues. The current
month’s revenues were $3.3 million, lease operating expenses
including property taxes were $3.1 million, and capital
expenditures were $0.2 million. Average realized prices for the
Developed Properties were $58.68 per Boe in October, as compared to
$59.69 per Boe in September. Net profits for the month of October
for the Developed Properties were $30,000, which was reduced by the
cumulative net profits deficit for the Developed Properties of
approximately $0.2 million, leaving a net deficit of approximately
$0.1 million, which will be subtracted from any future net
profits.
The current month’s calculation included approximately $92,000
for the 7.5% overriding royalty interest on the Remaining
Properties from Orcutt Diatomite and Orcutt Field. Average realized
prices for the Remaining Properties were $55.93 per Boe in October,
as compared to $57.18 per Boe in September. The cumulative net
profits deficit for the Remaining Properties, including the 7.5%
overriding royalty interest payments, decreased by approximately
$0.1 million and now totals $0.1 million as of October 2019.
The monthly operating and services fee of approximately $93,000
payable to PCEC and Trust general and administrative expenses of
$40,000 together exceeded the distribution of approximately $92,000
received from PCEC from the 7.5% overriding royalty interest on the
Remaining Properties, creating a shortfall of approximately
$41,000.
PCEC has 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. Further, if the Trust
requires more than the $1 million under the letter of credit to pay
administrative expenses, PCEC may loan funds to the Trust necessary
to pay such expenses. 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. The Trust will be borrowing funds from PCEC to pay the
expected shortfall of approximately $41,000, bringing the total
amount of outstanding funds borrowed from PCEC to $141,000.
Consequently, no further distributions will be made to Trust
unitholders until the indebtedness created by such amounts drawn or
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 November 2019:
Underlying Properties
Sales Volumes
Average Price
(Boe)
(Boe/day)
(per Boe)
Developed Properties (a)
56,239
1,814
$
56.68
Remaining Properties (b)
22,912
739
$
55.93
(a) Crude oil sales represented 99% of
sales volumes
(b) Crude oil sales represented 100% of
sales volumes
Recent Developments
As previously disclosed, on October 4, 2019
PricewaterhouseCoopers LLP resigned as the independent registered
public accounting firm of the Trust. Although The Bank of New York
Mellon Trust Company, N.A., the trustee of the Trust (the
“Trustee”), is searching for a successor independent registered
public accounting firm, the Trustee has not yet identified a
suitable successor willing to serve as the Trust’s independent
registered public accounting firm. As the Trust has not yet
appointed a successor independent registered public accounting
firm, the Trust was unable to file its Quarterly Report on Form
10-Q for the quarter ended September 30, 2019 (the “Form 10-Q”) by
the appropriate due date. As a result of the foregoing, the Trust
has received notice from the New York Stock Exchange (the “NYSE”)
that the Trust is not in compliance with the NYSE’s continued
listing requirements under the timely filing criteria outlined in
Section 802.01E of the NYSE Listed Company Manual. The Trust will
have six months from November 12, 2019 to file the Form 10-Q with
the SEC. The Trust can regain compliance with the NYSE’s continued
listing requirements at any time during this six-month period by
filing the Form 10-Q with the SEC. The Trust intends to file the
Form 10-Q as soon as reasonably practicable following the
appointment of a suitable successor independent registered public
accounting firm. If the Trust fails to file the Form 10-Q within
this six-month period, the NYSE may grant, at its sole discretion,
an extension of up to six additional months for the Trust to regain
compliance, depending on the specific circumstances. The notice
from the NYSE also provides that the NYSE may nevertheless commence
delisting proceedings at any time, including during the six-month
grace period, if it deems that the circumstances warrant. Under
NYSE rules, the Trust’s units of beneficial interest will remain
listed on the NYSE under the symbol “ROYT” with an “LF” indicator
to signify late filing status.
No assurance can be given that the Trust will be able to regain
compliance with the aforementioned listing requirement or maintain
compliance with the other continued listing requirements set forth
in the NYSE Listed Company Manual. If the Trust’s units of
beneficial interest ultimately were to be suspended from trading
on, or delisted from, the NYSE for any reason, it could have
adverse consequences including, among others: lower demand and
market price for the Trust’s units of beneficial interest; adverse
publicity; and a reduced interest in the Trust from investors,
analysts and other market participants.
PCEC has retained Whitley Penn to be its independent registered
public accounting firm and is currently engaging an expert to
review the plugging and abandonment liabilities.
The state of California has issued a Moratorium on High-Pressure
Extraction Practices as announced in the California Department of
Conservation press release #2019-05 issued on November 19, 2019.
The Moratorium expressly precludes any new drilling which utilizes
High-Pressure Extraction Practices. PCEC is working with
appropriate authorities to understand the impacts the Moratorium
will have on PCEC business. PCEC currently is engaged in this type
of extraction practices for a majority of its production.
Clarification for Brokers and Middlemen
Although no distributions were paid to unitholders in October or
November 2019, income and expense reportable in those periods
should be allocated among holders of record as of October 11, 2019
and November 12, 2019, respectively.
Overview of Trust Structure
Pacific Coast Oil Trust is a 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 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.
Cautionary Statement Regarding
Forward-Looking Information
This press release contains statements that are "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements contained in this
press release, other than statements of historical facts, are
"forward-looking statements" for purposes of these provisions.
These forward-looking statements include the amount and date of any
anticipated distribution to unitholders, the Trust’s borrowing of
funds from PCEC, statements regarding the Trust’s ability to file
its Quarterly Report on Form 10-Q for the quarter ended September
30, 2019 and statements regarding the Trust’s ability to regain
compliance with the NYSE listing requirement described above or
maintain compliance with the other continued listing requirements
set forth in the NYSE Listed Company Manual. Any anticipated
distribution is based, in part, on the amount of cash received or
expected to be received by the Trust from PCEC with respect to the
relevant period. Any differences in actual cash receipts by the
Trust could affect this distributable amount. The amount of such
cash received or expected to be received by the Trust (and its
ability to pay distributions) has been and will be significantly
and negatively affected by prevailing low commodity prices, which
have declined significantly, could decline further and could remain
low for an extended period of time. Other important factors that
could cause actual results to differ materially include expenses
related to the operation of the Underlying Properties, including
lease operating expenses, expenses of the Trust, and reserves for
anticipated future expenses. Statements made in this press release
are qualified by the cautionary statements made in this press
release. Neither PCEC nor the Trustee intends, and neither assumes
any obligation, to update any of the statements included in this
press release. An investment in units issued by Pacific Coast Oil
Trust is subject to the risks described in the Trust's Annual
Report on Form 10-K for the year ended December 31, 2018 filed with
the SEC on March 8, 2019, and if applicable, the Trust’s subsequent
Quarterly Reports on Form 10-Q. The Trust's Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q are available over the
Internet at the SEC's website at http://www.sec.gov.
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version on businesswire.com: https://www.businesswire.com/news/home/20191126005801/en/
Pacific Coast Oil Trust The Bank of New York Mellon Trust
Company, N.A., as Trustee Sarah Newell 1(512) 236-6555
Pacific Coast Oil (NYSE:ROYT)
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