##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 1-10243
 BP PRUDHOE BAY ROYALTY TRUST
  DELAWARE
    
    13-6943724State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., TRUSTEE919 CONGRESS AVE.AUSTIN, TEXAS
    
    78701(Address of principal executive offices)
    
    (Zip Code)
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredUNITS OF BENEFICIAL INTEREST
    
    NEW YORK STOCK EXCHANGE
  þ o
 o þ
 þ o
 o o
 þ
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### Table of Contents



TABLE OF CONTENTS
 PART I
    
    
    
    
    3ITEM 1.
    
    BUSINESS
    
    
    3INTRODUCTION
    
    
    3THE TRUST
    
    
    4THE ROYALTY INTEREST
    
    
    8THE UNITS
    
    
    11THE BP SUPPORT AGREEMENT
    
    
    13THE PRUDHOE BAY UNIT AND FIELD
    
    
    14INDUSTRY CONDITIONS AND REGULATIONS
    
    
    19CERTAIN TAX CONSIDERATIONS
    
    
    19ITEM 1A.
    
    RISK FACTORS
    
    
    22ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    25ITEM 2.
    
    PROPERTIES
    
    
    25ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    26ITEM 4.
    
    REMOVED
    
    
    26PART II
    
    
    
    
    27ITEM 5.
    
    MARKET FOR REGISTRANT'S UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS
    
    
    27ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    28ITEM 7.
    
    TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    28ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    32ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    34ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    47ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    47ITEM 9B.
    
    OTHER INFORMATION
    
    
    49PART III
    
    
    
    
    49ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    49
 i




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ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    50ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS
    
    
    50ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    53ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    53ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    53SIGNATURES
    
    
    53EX-10.2EX-31EX-32EX-99
  ii




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PART I
 
 ITEM 1. BUSINESS
 
 INTRODUCTION
   http://www.sec.gov
 http://www.businesswire.com/portal/site/home/news/company?vnsId=41701 sarah.newell@bnymellon.com
  Forward-Looking Statements
  3




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THE TRUST
 Trust Property
 1
  Employees
  Duties and Powers of the Trustee
  
 *
    
    The term barrel is a unit of measure of
petroleum liquids equal to 42 United States gallons corrected to 60 degrees
Fahrenheit temperature. 4




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Sales of Royalty Interest; Borrowings and Reserves
     5




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Irrevocability; Amendment of the Trust Agreement
   Termination of the Trust
   6




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Resignation or Removal of Trustee
  Voting Rights of Unit Holders
   7




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THE ROYALTY INTEREST
  Royalty Production
  Per Barrel Royalty
  WTI Price
  8




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Chargeable Costs
  Calendar
    
    Chargeable Costsyear
    
    per barrel2011
    
    $
    16.602012
    
    
    16.702013
    
    
    16.802014
    
    
    16.902015
    
    
    17.002016
    
    
    17.102017
    
    
    17.202018
    
    
    20.002019
    
    
    23.752020
    
    
    26.50
  Cost Adjustment Factor
  Production Taxes
  et seq.
 9




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Per Barrel Royalty Calculations
  10




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Cost
    
    Adjusted
    
    
    
    
    
    Average PerAverage
    
    Chargeable
    
    Adjustment
    
    Chargeable
    
    Production
    
    BarrelWTI Price
    
    Costs
    
    Factor
    
    Costs
    
    Taxes(1)
    
    RoyaltyCalendar 2006:4th Qtr 2005
    
    $
    60.01
    
    
    $
    12.25
    
    
    
    1.521
    
    
    $
    18.63
    
    
    $
    8.01
    
    
    $
    33.371st Qtr 2006
    
    
    63.36
    
    
    
    12.50
    
    
    
    1.530
    
    
    
    19.13
    
    
    
    8.50
    
    
    
    35.732nd Qtr 2006
    
    
    70.53
    
    
    
    12.50
    
    
    
    1.559
    
    
    
    19.49
    
    
    
    9.56
    
    
    
    41.483rd Qtr 2006
    
    
    70.64
    
    
    
    12.50
    
    
    
    1.570
    
    
    
    19.63
    
    
    
    10.68
    
    
    
    40.34Calendar 2007:4th Qtr 2006
    
    $
    60.17
    
    
    $
    12.50
    
    
    
    1.552
    
    
    $
    19.39
    
    
    $
    9.31
    
    
    $
    31.461st Qtr 2007
    
    
    58.17
    
    
    
    12.75
    
    
    
    1.567
    
    
    
    19.98
    
    
    
    8.66
    
    
    
    29.542nd Qtr 2007
    
    
    65.00
    
    
    
    12.75
    
    
    
    1.601
    
    
    
    20.42
    
    
    
    10.59
    
    
    
    34.003rd Qtr 2007
    
    
    75.29
    
    
    
    12.75
    
    
    
    1.601
    
    
    
    20.42
    
    
    
    14.45
    
    
    
    40.42Calendar 2008:4th Qtr 2007
    
    $
    90.93
    
    
    $
    12.75
    
    
    
    1.618
    
    
    $
    20.63
    
    
    $
    22.29
    
    
    $
    48.011st Qtr 2008
    
    
    97.78
    
    
    
    13.00
    
    
    
    1.630
    
    
    
    21.19
    
    
    
    33.58
    
    
    
    43.012nd Qtr 2008
    
    
    124.34
    
    
    
    13.00
    
    
    
    1.668
    
    
    
    21.68
    
    
    
    52.37
    
    
    
    50.293rd Qtr 2008
    
    
    118.69
    
    
    
    13.00
    
    
    
    1.687
    
    
    
    21.93
    
    
    
    48.18
    
    
    
    48.58Calendar 2009:4th Qtr 2008
    
    $
    58.03
    
    
    $
    13.00
    
    
    
    1.636
    
    
    $
    21.26
    
    
    $
    11.42
    
    
    $
    25.351st Qtr 2009
    
    
    43.20
    
    
    
    13.25
    
    
    
    1.634
    
    
    
    21.65
    
    
    
    5.43
    
    
    
    16.132nd Qtr 2009
    
    
    59.74
    
    
    
    13.25
    
    
    
    1.647
    
    
    
    21.82
    
    
    
    11.03
    
    
    
    26.893rd Qtr 2009
    
    
    68.13
    
    
    
    13.25
    
    
    
    1.662
    
    
    
    22.02
    
    
    
    14.57
    
    
    
    31.54Calendar 2010:4th Qtr 2009
    
    $
    75.90
    
    
    $
    13.25
    
    
    
    1.666
    
    
    $
    22.07
    
    
    $
    18.64
    
    
    $
    35.191st Qtr 2010
    
    
    78.59
    
    
    
    14.50
    
    
    
    1.669
    
    
    
    24.20
    
    
    
    18.96
    
    
    
    35.432nd Qtr 2010
    
    
    77.96
    
    
    
    14.50
    
    
    
    1.680
    
    
    
    24.36
    
    
    
    18.59
    
    
    
    35.013rd Qtr 2010
    
    
    76.04
    
    
    
    14.50
    
    
    
    1.681
    
    
    
    24.37
    
    
    
    17.43
    
    
    
    34.23
 
 (1)
    
    Production Taxes for the third quarter of 2006 through the fourth quarter of 2007 reflect the
effect of the 2006 Amendments of the Production Tax Statutes. Production Taxes for the first
quarter of 2008 and subsequent periods reflect the application of ACES.(2)
    
    Dollar amounts in the table have been rounded to two decimal places for presentation and do
not reflect the precision of the actual calculations. 
 THE UNITS
 Units
  11




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Distributions of Income
   Reports to Unit Holders
  Limited Liability of Unit Holders
  Possible Divestiture of Units
  12




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Issuance of Additional Units
  
 THE BP SUPPORT AGREEMENT
     13




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THE PRUDHOE BAY UNIT AND FIELD
 Prudhoe Bay Unit Operation and Ownership
     Oil rim
    
    
    Gas capBP Alaska
    
    
    26.36
    %(a)
    
    
    26.36
    %(b)Exxon Mobil
    
    
    36.40
    
    
    
    36.40ConocoPhillips
    
    
    36.08
    
    
    
    36.08Chevron
    
    
    1.16
    
    
    
    1.16Total
    
    
    100.00
    %
    
    
    100.00
    %
 
 (a)
    
    The Trusts share of oil production is computed based on BP Alaskas ownership interest
in the oil rim participating area of 50.68% as of February 28, 1989. Subsequent decreases
in BP Alaskas participation in oil rim ownership do not affect calculation of Royalty
Production from the 1989 Working Interests and have not decreased the Trusts Royalty
Interest.(b)
    
    The Trusts share of condensate production is computed based on BP Alaskas ownership
interest in the gas cap participating area of 13.84% as of February 28, 1989. Subsequent
increases in BP Alaskas gas cap ownership do not affect calculation of Royalty Production
from the 1989 Working Interests and have not increased the Trusts Royalty Interest.  14




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The Prudhoe Bay Field
  Field Geology
    Oil Characteristics
   15




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Historical Production
   Oil
    
    
    CondensateNet to 1989
    
    
    
    
    
    
    Net to 1989Calendar
    
    
    
    
    
    Working
    
    
    
    
    
    
    Workingyear
    
    Total field
    
    
    Interests
    
    
    Total field
    
    
    Interests(thousand barrels per day)2006
    
    
    173.9
    
    
    
    77.1
    
    
    
    76.7
    
    
    
    9.32007 (a)
    
    
    184.1
    
    
    
    81.6
    
    
    
    77.9
    
    
    
    9.42008
    
    
    192.7
    
    
    
    85.4
    
    
    
    69.4
    
    
    
    8.42009
    
    
    189.1
    
    
    
    83.9
    
    
    
    63.0
    
    
    
    7.62010
    
    
    183.9
    
    
    
    81.6
    
    
    
    59.0
    
    
    
    7.1
 
 (a)
    
    2007 production figures reported in the Trusts Annual Report on Form 10-K for
the year ended December 31, 2007 have been revised to reflect actual production for the
year. Collection and Transportation of Prudhoe Bay Oil
   16




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Reservoir Management
   Reserve Estimates
   17




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2 3 4 Extractive Activities  Oil and Gas
   
 2
    
    Proved developed reserves are reserves that
can be expected to be recovered through existing wells with existing equipment
and operating methods or in which the cost of the required equipment is
relatively minor compared to the cost of a new well.3
    
    Proved undeveloped reserves are reserves that
are expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion.4
    
    The unweighted arithmetic average of the WTI
Price on the first day of each month during the year. 18




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INDUSTRY CONDITIONS AND REGULATIONS
    
 CERTAIN TAX CONSIDERATIONS
  19




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Federal Income Tax
 Classification of the Trust
  General Features of Grantor Trust Taxation
  Taxation of Unit Holders
    Depletion Deductions
  20




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Taxation of Foreign Unit Holders
    Sale of Units
  21




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Backup Withholding
  Widely Held Fixed Investment Trusts
  State Income Taxes
  
 ITEM 1A. RISK FACTORS
  
    
    Royalty Production from the Prudhoe Bay field is projected to decline and will
eventually cease.
  
    
    Construction of a proposed gas pipeline from the North Slope of Alaska could accelerate
the decline in Royalty Production from the Prudhoe Bay field.
  22




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
    
    Royalty Production from the Prudhoe Bay field may have
been adversely affected by the recent
changes to the Alaska Production Tax Statutes.
  23




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
    
    Royalty payments by BP Alaska to the Trust are unpredictable, because they depend on
Cushing, Oklahoma WTI spot prices, which have been volatile in recent years, and on the
volume of production from the 1989 Working Interests, which may vary from quarter to
quarter in the future.
    
    
    Prudhoe Bay field oil production could be shut in partially or entirely from time to
time as a result of damage to or failures of field pipelines or equipment.
   
    
    Oil production from the Prudhoe Bay Unit could be interrupted by damage to the
Trans-Alaska Pipeline System from natural causes, accidents, deliberate attacks or
declining oil flows.
  24




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
    
    Production from the 1989 Working Interests may be interrupted or discontinued by BP
Alaska.
  
    
    There are potential conflicts of interest between BP Alaska and the Trust that could
affect the royalties paid to Unit holders.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  25




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. REMOVED
 26




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF
UNITS
  DistributionsHigh
    
    Low
    
    Per Unit2009:First Quarter
    
    $
    83.07
    
    
    $
    50.04
    
    
    $
    1.637Second Quarter
    
    
    75.27
    
    
    
    64.26
    
    
    
    0.992Third Quarter
    
    
    76.37
    
    
    
    63.25
    
    
    
    1.650Fourth Quarter
    
    
    83.40
    
    
    
    71.50
    
    
    
    1.7302010:First Quarter
    
    $
    98.79
    
    
    $
    80.45
    
    
    $
    3.612Second Quarter
    
    
    105.89
    
    
    
    85.01
    
    
    
    2.267Third Quarter
    
    
    103.59
    
    
    
    86.79
    
    
    
    2.095Fourth Quarter
    
    
    129.41
    
    
    
    100.16
    
    
    
    2.021
   27




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ITEM 6. SELECTED FINANCIAL DATA
  Year ended December 312010
    
    2009
    
    2008
    
    2007
    
    2006(in thousands, except per Unit amounts)Royalty revenues
    
    $
    184,042
    
    
    
    130,014
    
    
    
    252,298
    
    
    
    177,318
    
    
    
    184,864Litigation expense
reimbursement
    
    $
    1,705
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlement revenue
    
    $
    
    
    
    
    29,474
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    $
    2
    
    
    
    4
    
    
    
    33
    
    
    
    81
    
    
    
    75Trust administration expenses
    
    $
    1,338
    
    
    
    1,459
    
    
    
    1,797
    
    
    
    1,687
    
    
    
    1,057Cash earnings
    
    $
    184,411
    
    
    
    158,033
    
    
    
    250,534
    
    
    
    175,712
    
    
    
    183,882Cash distributions
    
    $
    213,885
    
    
    
    128,575
    
    
    
    250,525
    
    
    
    175,713
    
    
    
    183,883Cash distributions per unit
    
    $
    9.995
    
    
    
    6.008
    
    
    
    11.707
    
    
    
    8.211
    
    
    
    8.593
 December 312010
    
    2009
    
    2008
    
    2007
    
    2006(dollar amounts in thousands)Trust corpus
    
    $
    862
    
    
    
    32,273
    
    
    
    4,757
    
    
    
    6,592
    
    
    
    8,853Total assets
    
    $
    1,001
    
    
    
    32,484
    
    
    
    5,035
    
    
    
    7,035
    
    
    
    9,044Units outstanding
    
    
    21,400,000
    
    
    
    21,400,000
    
    
    
    21,400,000
    
    
    
    21,400,000
    
    
    
    21,400,000
 
 ITEM 7. TRUSTEES DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Liquidity and Capital Resources
   28




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Results of Operations
     29




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The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles.
 30




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2010 compared to 2009
  12 Months
    
    
    
    12 MonthsEnded
    
    Increase (decrease)
    
    Ended9/30/2010
    
    Amount
    
    Percent
    
    9/30/2009Average WTI Price
    
    $
    77.12
    
    
    $
    19.85
    
    
    
    34.7
    
    
    $
    57.28Adjusted Chargeable Costs
    
    $
    23.75
    
    
    $
    2.06
    
    
    
    9.5
    
    
    $
    21.69Average Production Taxes
    
    $
    18.41
    
    
    $
    7.79
    
    
    
    73.4
    
    
    $
    10.61Average Per Barrel Royalty
    
    $
    34.97
    
    
    $
    9.99
    
    
    
    40.0
    
    
    $
    24.98Average net royalty production (mb/d)
    
    
    87.7
    
    
    
    0.7
    
    
    
    0.8
    
    
    
    87.0
  Year Ended
    
    Increase (decrease)
    
    Year Ended12/31/2010
    
    Amount
    
    Percent
    

12/31/2009(In thousands)Royalty revenues
    
    $
    184,042
    
    
    $
    54,028
    
    
    
    41.6
    
    
    $
    130,014Cash earnings
    
    $
    184,411
    
    
    $
    26,378
    
    
    
    16.7
    
    
    $
    158,033Cash distributions
    
    $
    213,885
    
    
    $
    85,310
    
    
    
    66.4
    
    
    $
    128,575Administrative expenses
    
    $
    1,338
    
    
    
    ($121
    )
    
    
    (8.3
    )
    
    $
    1,459Trust corpus at year end
    
    $
    862
    
    
    
    ($31,411
    )
    
    
    (97.3
    )
    
    $
    32,273
  31




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2009 compared to 2008
 12 Months
    
    
    
    
    
    
    
    
    
    12 MonthsEnded
    
    Increase (decrease)
    
    Ended9/30/2009
    
    Amount
    
    Percent
    
    9/30/2008Average WTI Price
    
    $
    57.28
    
    
    
    ($50.66
    )
    
    
    (46.9
    )
    
    $
    107.94Adjusted Chargeable Costs
    
    $
    21.69
    
    
    $
    0.33
    
    
    
    1.5
    
    
    $
    21.36Average Production Taxes
    
    $
    10.61
    
    
    
    ($28.49
    )
    
    
    (72.9
    )
    
    $
    39.11Average Per Barrel Royalty
    
    $
    24.98
    
    
    
    ($22.50
    )
    
    
    (47.4
    )
    
    $
    47.47Average net royalty production (mb/d)
    
    
    87.0
    
    
    
    (1.9
    )
    
    
    (2.1
    )
    
    
    88.9
  Year Ended
    
    Increase (decrease)
    
    Year Ended12/31/2009
    
    Amount
    
    Percent
    
    12/31/2008(In thousands)Royalty revenues
    
    $
    130,014
    
    
    
    ($122,284
    )
    
    
    (48.5
    )
    
    $
    252,298Cash earnings
    
    $
    158,033
    
    
    
    ($92,501
    )
    
    
    (36.9
    )
    
    $
    250,534Cash distributions
    
    $
    128,575
    
    
    
    ($121,950
    )
    
    
    (48.7
    )
    
    $
    250,525Administrative expenses
    
    $
    1,459
    
    
    
    ($338
    )
    
    
    (18.8
    )
    
    $
    1,797Trust corpus at quarter end
    
    $
    32,273
    
    
    $
    27,516
    
    
    
    578.4
    
    
    $
    4,757
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  32




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 BP PRUDHOE BAY ROYALTY TRUST
 Index To Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    34Statements of Assets, Liabilities and Trust Corpus as of December 31, 2010 and 2009
    
    35Statements of Cash Earnings and Distributions for the years ended
December 31, 2010, 2009 and 2008
    
    36Statements of Changes in Trust Corpus for the years ended
December 31 2010, 2009 and 2008
    
    37Notes to Financial Statements
    
    38
 33




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Report of Independent Registered Public Accounting Firm
 
     Internal Control  Integrated Framework
  
 34




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
 
 Statement of Assets, Liabilities and Trust Corpus
(Prepared on a modified basis of cash receipts and disbursements)
 (In thousands, except unit data)
 December 31, 2010
    
    
    December 31, 2009AssetsRoyalty interest, net (Notes 1, 2 and 3)
    
    $
    
    
    
    $
    2,009Cash and cash equivalents (Note 2)
    
    
    1,001
    
    
    
    30,475Total assets
    
    $
    1,001
    
    
    $
    32,484Liabilities and Trust CorpusAccrued expenses
    
    $
    139
    
    
    $
    211Trust corpus (40,000,000 units of
beneficial interest authorized,
21,400,000 units issued and
outstanding)
    
    
    862
    
    
    
    32,273Total liabilities and trust corpus
    
    $
    1,001
    
    
    $
    32,484
  35




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
 
 Statements of Cash Earnings and Distributions
(Prepared on a modified basis of cash receipts and disbursements)
 (In thousands, except unit data)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Royalty revenues
    
    $
    184,042
    
    
    $
    130,014
    
    
    $
    252,298Litigation expense reimbursement (Note 7)
    
    $
    1,705
    
    
    
    
    
    
    
    Settlement revenue (Note 7)
    
    
    
    
    
    
    29,474
    
    
    
    Interest income
    
    
    2
    
    
    
    4
    
    
    
    33Less: Trust administrative expenses
    
    
    (1,338
    )
    
    
    (1,459
    )
    
    
    (1,797
    )Cash earnings
    
    $
    184,411
    
    
    $
    158,033
    
    
    $
    250,534Cash distributions
    
    $
    213,885
    
    
    $
    128,575
    
    
    $
    250,525Cash distributions per unit
    
    $
    9.995
    
    
    $
    6.008
    
    
    $
    11.707Units outstanding
    
    
    21,400,000
    
    
    
    21,400,000
    
    
    
    21,400,000
  36




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
 
 Statements of Changes in Trust Corpus
(Prepared on a modified basis of cash receipts and disbursements)
 (In thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Trust corpus at beginning of year
    
    $
    32,273
    
    
    $
    4,757
    
    
    $
    6,592Cash earnings
    
    
    184,411
    
    
    
    158,033
    
    
    
    250,534Decrease in accrued expenses
    
    
    72
    
    
    
    67
    
    
    
    165Cash distributions
    
    
    (213,885
    )
    
    
    (128,575
    )
    
    
    (250,525
    )Amortization of royalty interest
    
    
    (2,009
    )
    
    
    (2,009
    )
    
    
    (2,009
    )Trust corpus at end of year
    
    $
    862
    
    
    $
    32,273
    
    
    $
    4,757
  37




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 (1)
    
    Formation of the Trust and OrganizationBP Prudhoe Bay Royalty Trust (the Trust), a grantor trust, was created as a Delaware statutory
trust pursuant to a Trust Agreement dated February 28, 1989 among the Standard Oil Company
(Standard Oil), BP Exploration (Alaska) Inc. (BP Alaska), The Bank of New York Mellon, as
trustee, and BNY Mellon Trust of Delaware (successor to The Bank of New York (Delaware)), as
co-trustee. On December 15, 2010, The Bank of New York Mellon resigned as trustee and was
replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as
successor trustee (the Trustee). Standard Oil and BP Alaska are indirect wholly owned
subsidiaries of BP p.l.c. (BP).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) of 16.4246% on 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 BP
Alaskas working interest as of February 28, 1989 in the Prudhoe Bay field, 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. BP has guaranteed the performance of BP Alaska of its
payment obligations with respect to the Royalty Interest.Effective January 1, 2000, BP Alaska and all other Prudhoe Bay working interest owners
cross-assigned interests in the Prudhoe Bay field pursuant to the Prudhoe Bay Unit Alignment
Agreement. BP Alaska retained all rights, obligations, and liabilities associated with the
Trust.The trustees of the Trust are The Bank of New York Mellon Trust Company, N.A. and BNY Mellon
Trust of Delaware. BNY Mellon Trust of Delaware serves as co-trustee in order to satisfy certain
requirements of the Delaware Statutory Trust Act. The Bank of New York Mellon Trust Company,
N.A. 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 for
inflation) and Production Taxes (based on statutory rates then in existence).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 (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 are less than $1,000,000 per year (unless the net revenues during such period
are materially and adversely affected by certain events).
 38




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 In order to ensure the Trust has the ability to pay future expenses, the Trust established a
cash reserve account which the Trustee believes is sufficient to pay approximately one years
current and expected liabilities and expenses of the Trust.
 (2)
    
    Basis of AccountingThe 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.
    
    Cash reserves may be established by the Trustee for certain contingencies that would
not be recorded under generally accepted accounting principles.d.
    
    Amortization of the Royalty Interest has been calculated based on the units of
production method. Such amortization was charged directly to the Trust corpus, and did not
affect cash earnings. The daily rate for amortization per net equivalent barrel of oil for
the years ended December 31, 2010, 2009 and 2008 was $0.38, $0.38 and $0.38, respectively.
The Trust evaluated 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
the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC)
360, Property, Plant, and Equipment. If the expected future undiscounted cash flows were
less than the carrying value, the Trust recognized an impairment loss for the difference
between the carrying value and the estimated fair value of the Royalty Interest. As of
December 31, 2010, amortization and impairment losses had reduced the carrying value of the
Royalty Interest to zero (see Note 3 below). No further amortization or impairment of the
Royalty Interest will be recognized in future periods.
 While these statements differ from financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, the modified cash basis of
reporting revenues and distributions is considered to be the most meaningful because quarterly
distributions to the Trust 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 corpus of the Trust as of December 31, 2010 and 2009, and the modified
cash earning and distributions and changes in Trust corpus for the years ended December 31,
2010, 2009 and 2008. The adjustments are of a normal recurring nature and are, in the opinion of
the Trustee, necessary to fairly present the results of operations.As of December 31, 2010 and 2009, cash equivalents which represent the cash reserve consist of
U.S. treasury bills with an initial term of less than three months.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, and the difference could be material.
 39




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 (3)
    
    Royalty InterestThe Royalty Interest is comprised of the following at December 31, 2010 and 2009 (in thousands):
 December 31,2010
    
    
    2009Royalty Interest (at inception)
    
    $
    535,000
    
    
    $
    535,000Less: Accumulated amortization
    
    
    (359,473
    )
    
    
    (357,465
    )Impairment write-down
    
    
    (175,527
    )
    
    
    (173,518
    )Balance, end of period
    
    $
    
    
    
    $
    2,009
 (4)
    
    Income TaxesThe 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 Trust 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 Trust 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.
 (5)
    
    Alaska Oil and Gas Production TaxA bill (popularly titled Alaskas Fair and Equitable Share or ACES) took effect in December
2007 which amended the Alaska oil and gas production tax statutes in certain respects. ACES
changed the basic tax rate from 22.5% to 25% of the production tax value of taxable oil (gross
value at the point of production for the calendar year less the producers direct costs of
exploring for, developing, or producing oil or gas deposits located within the producers leases
or properties in Alaska for the year) and increased a progressivity rate, determined by the
average monthly production tax value of the oil produced. If the producers average monthly
production tax value per barrel is greater than $30 but not more than $92.50, the progressivity
tax rate is 0.4% times the amount by which the average monthly production tax value exceeds $30
per barrel. If the producers average monthly production tax value per barrel is greater than
$92.50, the progressivity tax rate is the sum of 25% and the product of 0.1% multiplied by the
difference between the average monthly production tax value per barrel and $92.50, except that
the sum may not exceed 50%.The Trustee and BP Alaska have entered into a letter agreement and an amendment thereto (the
Letter Agreement) to resolve issues associated with ACES. The Letter Agreement modified the
calculation of Production Taxes in the daily Per Barrel Royalty calculation.
 40




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BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 (6)
    
    Legal ExpensesThe Trust incurred legal and other expenses as a result of litigation and other issues arising
out of the August 2006 shutdown of the Prudhoe Bay field. Legal fees and expenses contributed
materially to the Trust administrative expenses during 2008, 2009 and 2010.
 (7)
    
    Claims Settlement and Litigation Expense ReimbursementIn May 2009 the Trustee entered into a settlement agreement with BP Alaska to resolve certain
issues related to the temporary shutdown of the Prudhoe Bay field in August 2006 following oil
spills and to compromise any claims that the Trust and past, present and future holders of Trust
Units might have had relating to conduct by BP Alaska that may have resulted in a reduction of
the royalty payments received by the Trust in 2006, 2007 and 2008. Under the settlement
agreement, BP Alaska paid approximately $29,469,000 into an interest-bearing escrow account
pending final dismissal of certain litigation and court approval of the settlement agreement. In
December 2009, the settlement amount and accrued interest, totaling approximately $29,474,000,
was released from escrow and paid to the Trust. This amount, together with BP Alaskas royalty
payment with respect to the quarter ended December 31, 2009 was distributed to Unit holders in
January 2010.The Trust incurred legal fees and expenses as a result of litigation and other issues arising
out of the shutdown of the Prudhoe Bay field. Under the settlement agreement, BP Alaska agreed
to pay the Trustee its reasonable attorneys fees and expenses, including internal expenses and
expert fees, incurred in its investigation of the claims that are the subject of the settlement
agreement, in responding to subpoenas, in defending a lawsuit, and in seeking court approval of
the settlement agreement. In February 2010, BP Alaska paid the Trustee approximately $1,705,000
as reimbursement of those expenses. Except for potential continuing legal fees and expenses, the
Trustee does not anticipate any other loss contingency resulting from the shutdown of the
Prudhoe Bay field.
 (8)
    
    Royalty Revenue AdjustmentsCertain of the royalty payments received by the Trust in 2008, 2009 and 2010 were adjusted by BP
Alaska to compensate for underpayments or overpayments of the royalties due with respect to the
quarters ended prior to the dates of such payments. Average net production of crude oil and
condensate from the proved reserves allocated to the Trust was less than 90,000 barrels per day
during certain quarters. Royalty payments by BP Alaska with respect to those quarters were based
on estimates by BP Alaska of production levels because actual data was not available by the
dates on which payments were required to be made to the Trust. Subsequent recalculation by BP
Alaska of royalty payments due based on actual production data resulted in the payment
adjustments shown in the table below (in thousands):
 2010 Payments ReceivedJanuary
    
    
    April
    
    
    July
    
    
    OctoberRoyalty payment as
calculated
    
    $
    47,862
    
    
    $
    47,136
    
    
    $
    45,462
    
    
    $
    43,496Adjustment for
underpayment
(overpayment), plus
accrued interest
    
    
    159
    
    
    
    
    
    
    
    
    
    
    
    (73
    )Net payment received
    
    $
    48,021
    
    
    $
    47,136
    
    
    $
    45,462
    
    
    $
    43,423
 41




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 2009 Payments ReceivedJanuary
    
    
    April
    
    
    July
    
    
    OctoberRoyalty payment as
calculated
    
    $
    34,481
    
    
    $
    21,449
    
    
    $
    36,051
    
    
    $
    37,621Adjustment for
underpayment
(overpayment), plus
accrued interest
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    (387
    )Net payment received
    
    $
    35,280
    
    
    $
    21,449
    
    
    $
    36,051
    
    
    $
    37,234
 2008 Payments ReceivedJanuary
    
    
    April
    
    
    July
    
    
    OctoberRoyalty payment as
calculated
    
    $
    65,284
    
    
    $
    57,859
    
    
    $
    66,030
    
    
    $
    61,429Adjustment for
underpayment, plus accrued
interest
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    1,632Net payment received
    
    $
    65,348
    
    
    $
    57,859
    
    
    $
    66,030
    
    
    $
    63,061
 (9)
    
    Subsequent EventIn January 2011, the Trust received a payment of $51,660,233 from BP Alaska. This payment
consisted of $51,643,925, representing the royalty payment due with respect to the Trusts
Royalty Interest for the quarter ended December 31, 2010, plus $16,308, representing the amount
of an underpayment by BP Alaska, including interest on the underpayment, of the royalty payment
due with respect to the quarter ended September 30, 2010. On January 20, 2011, after deducting
Trust administrative expenses, the Trustee distributed $51,530,935 to Unit holders of record on
January 14, 2011.Subsequent events have been evaluated through the date of the annual report on Form 10-K in
which these financial statements are included.
 (10)
    
    Summary of Quarterly Results (Unaudited)A summary of selected quarterly financial information for the years ended December 31, 2010,
2009, and 2008 is as follows (in thousands, except unit data):
 2010 Fiscal QuarterFirst
    
    
    Second
    
    
    Third
    
    
    FourthRoyalty revenues
    
    $
    48,021
    
    
    $
    47,136
    
    
    $
    45,462
    
    
    $
    43,423Litigation expense reimbursement
    
    
    1,705
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Trust administrative expenses
    
    
    (202
    )
    
    
    (330
    )
    
    
    (621
    )
    
    
    (185
    )Cash earnings
    
    
    49,525
    
    
    
    46,806
    
    
    
    44,842
    
    
    
    43,238Cash distributions
    
    
    77,295
    
    
    
    48,511
    
    
    
    44,841
    
    
    
    43,238Cash distributions per unit
    
    
    3.6119
    
    
    
    2.2669
    
    
    
    2.0954
    
    
    
    2.0205
 42




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 2009 Fiscal QuarterFirst
    
    
    Second
    
    
    Third
    
    
    FourthRoyalty revenues
    
    $
    35,280
    
    
    $
    21,449
    
    
    $
    36,051
    
    
    $
    37,234Settlement revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,474Interest income
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    1Trust administrative expenses
    
    
    (269
    )
    
    
    (224
    )
    
    
    (746
    )
    
    
    (220
    )Cash earnings
    
    
    35,013
    
    
    
    21,225
    
    
    
    35,306
    
    
    
    66,489Cash distributions
    
    
    35,031
    
    
    
    21,225
    
    
    
    35,305
    
    
    
    37,014Cash distributions per unit
    
    
    1.6369
    
    
    
    0.9918
    
    
    
    1.6498
    
    
    
    1.7296
 2008 Fiscal QuarterFirst
    
    
    Second
    
    
    Third
    
    
    FourthRoyalty revenues
    
    $
    65,348
    
    
    $
    57,859
    
    
    $
    66,030
    
    
    $
    63,061Interest income
    
    
    19
    
    
    
    7
    
    
    
    3
    
    
    
    4Trust administrative expenses
    
    
    (183
    )
    
    
    (738
    )
    
    
    (689
    )
    
    
    (187
    )Cash earnings
    
    
    65,184
    
    
    
    57,128
    
    
    
    65,344
    
    
    
    62,878Cash distributions
    
    
    65,182
    
    
    
    57,137
    
    
    
    65,344
    
    
    
    62,862Cash distributions per unit
    
    
    3.0459
    
    
    
    2.6699
    
    
    
    3.0535
    
    
    
    2.9375
 Fiscal Year Ended2010
    
    
    2009
    
    
    2008Royalty revenues
    
    $
    184,042
    
    
    $
    130,014
    
    
    $
    252,298Settlement revenue
    
    
    
    
    
    
    29,474
    
    
    
    Litigation expense reimbursement
    
    
    1,705
    
    
    
    
    
    
    
    Interest income
    
    
    2
    
    
    
    4
    
    
    
    33Trust administrative expenses
    
    
    (1,338
    )
    
    
    (1,459
    )
    
    
    (1,797
    )Cash earnings
    
    
    184,411
    
    
    
    158,033
    
    
    
    250,534Cash distributions
    
    
    213,885
    
    
    
    128,575
    
    
    
    250,525Cash distributions per unit
    
    
    9.995
    
    
    
    6.008
    
    
    
    11.7068
 (11)
    
    Supplemental Reserve Information and Standardized Measure of Discounted Future Net Cash Flow
Relating to Proved Reserves (Unaudited)Pursuant to Statement of FASB ASC 932, Extractive Activities  Oil and Gas, the Trust is
required to include in its financial statements supplementary information regarding estimates of
quantities of proved reserves attributable to the Trust and future net cash flows. The following
information in this note with respect to the years ended December 31, 2009 and 2010 reflects the
adoption of Securities Exchange Act Release No. 59192, Modernization of Oil and Gas Reporting
which became effective for financial statements for fiscal years ending on or after December 31,
2009. The Trust has not restated reserve information with respect to the year ended December 31, 2008 to reflect
changes in the methodology for determining proved reserves prescribed by Release No. 59192.Estimates of proved reserves are inherently imprecise and subjective and are revised over time
as additional data becomes available. Such revisions may often be substantial. Information
regarding estimates of proved reserves attributable to the combined interests of BP Alaska and the Trust
were based on reserve estimates prepared by BP Alaska. BP Alaskas reserve estimates are
believed to be
 43




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 reasonable and consistent with presently known physical data concerning the size and character of the Prudhoe Bay field.
 There is no precise method of allocating estimates of physical quantities of reserve volumes
between BP Alaska and the Trust, since the Royalty Interest is not a working interest and the
Trust does not own and is not entitled to receive any specific volume of reserves from the
Prudhoe Bay field. Reserve volumes attributable to the Trust were estimated by allocating to the
Trust its share of estimated future production from the field, based on the 12-month average WTI
Price for 2010 ($79.43 per barrel) and 2009 ($61.18 per barrel), and on the WTI Price on
December 31, 2008 ($44.60 per barrel). Because the reserve volumes attributable to the Trust are
estimated using an allocation of reserve volumes based on the estimated future production and on
the current WTI Price, a change in the timing of estimated production or a change in the WTI
price will result in a change in the Trusts estimated reserve volumes. Therefore, the estimated
reserve volumes attributable to the Trust will vary if different production estimates and prices
are used.In addition to production estimates and prices, reserve volumes attributable to the Trust are
affected by the amount of Chargeable Costs that will be deducted in determining the Per Barrel
Royalty. Net proved reserves of oil and condensate attributable to the Trust as of December 31,
2010, 2009 and 2008, based on BP Alaskas latest reserve estimate at such times, the 12-month
average WTI prices for 2010 and 2009 and the WTI Price on December 31, 2008, were estimated to
be 78, 68 and 55 million barrels, respectively (of which 67, 57 and 46 million barrels,
respectively, are proved developed reserves). Under the provisions of FASB ASC 932, no
consideration can be given to reserves not considered proved at the present time.The standardized measure of discounted future net cash flow relating to proved reserves
disclosure required by FASB ASC 932 assigns monetary amounts to proved reserves based on current
prices. This discounted future net cash flow should not be construed as the current market value
of the Royalty Interest. A market valuation determination would include, among other things,
anticipated price changes and the value of additional reserves not considered proved at the
present time or reserves that may be produced after the currently anticipated end of field life.
At December 31, 2010, 2009 and 2008, the standardized measure of discounted future net cash flow
relating to proved reserves attributable to the Trust (estimated in accordance with the
provisions of FASB ASC 932), based on the 12-month average WTI Prices for 2010 and 2009 of
$79.43 and $61.18 per barrel and the WTI Price on December 31, 2008 of $44.60 per barrel,
respectively, were as follows (in thousands):
 December 31,2010
    
    
    2009
    
    
    2008Future cash inflows
    
    $
    1,992,585
    
    
    $
    1,331,319
    
    
    $
    632,47010% annual discount for
estimated timing of cash flows
    
    
    (806,097
    )
    
    
    (494,758
    )
    
    
    (213,900
    )Standardized measure of discounted future
net cash flow (a)
    
    $
    1,186,488
    
    
    $
    836,561
    
    
    $
    418,570
 
 (a)
    
    The following are the principal sources of the change in the standardized measure of
discounted future net cash flows (in thousands): 44




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
 December 31,2010
    
    
    2009
    
    
    2008Revisions of prior estimates
    
    $
    (14,830
    )
    
    $
    (17,629
    )
    
    $
    (17,490
    )Net changes in prices and production costs
    
    
    805,453
    
    
    
    714,714
    
    
    
    (1,969,952
    )Net change in production taxes
    
    
    (327,680
    )
    
    
    (173,810
    )
    
    
    879,903Other
    
    
    94
    
    
    
    2,581
    
    
    
    168463,037
    
    
    
    525,856
    
    
    
    (1,107,371
    )Royalty income received (b)
    
    
    (196,766
    )
    
    
    (149,722
    )
    
    
    (233,885
    )Accretion of discount
    
    
    83,656
    
    
    
    41,857
    
    
    
    159,984Net increase (decrease) during the year
    
    $
    349,927
    
    
    $
    417,991
    
    
    $
    (1,181,272
    )
 
 (b)
    
    For the purpose of this calculation, royalty income received for 2010, 2009 and 2008
includes the following: Period October 1, 2010 through December 31, 2010
    
    $
    51,660Period October 1, 2009 through December 31, 2009
    
    $
    48,021Period October 1, 2008 through December 31, 2008
    
    $
    35,280
  45




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##### Table of Contents



BP Prudhoe Bay Royalty Trust
Notes to Financial Statements
(Prepared on a modified basis of cash receipts and disbursements)
December 31, 2010
   December 31, 2007
    
    
    97,799Revisions of previous estimates (1)
    
    
    (37,988
    )Production
    
    
    (4,857
    )December 31, 2008
    
    
    54,954Revisions of previous estimates (2)
    
    
    18,419Production
    
    
    (5,229
    )December 31, 2009
    
    
    68,144Revisions of previous estimates (3)
    
    
    15,388Production
    
    
    (5,257
    )December 31, 2010
    
    
    78,275Proved developed reserves (thousands of barrels) as of:December 31, 2008
    
    
    46,096December 31, 2009
    
    
    57,077December 31, 2010
    
    
    67,401Proved undeveloped reserves (thousands of barrels) as of:December 31, 2008
    
    
    8,858December 31, 2009
    
    
    11,067December 31, 2010
    
    
    10,874
 
 (1)
    
    The negative revision in year-end 2008 reserves reflects a decrease in the WTI
Price from $96.01 per barrel at December 31, 2007 to $44.60 per barrel at December 31,
2008.(2)
    
    The positive revision in year-end 2009 reserves reflects an increase in the WTI
Price from $44.60 per barrel at December 31, 2008 to $61.18 per barrel using the 12-month
average of the first-day-of-the-month price for each month in the year ended December 31,
2009(3)
    
    The positive revision in year-end 2010 reserves reflects an increase in the WTI
Price from $61.18 per barrel for 2009 to $79.43 per barrel for 2010 using the 12-month
average of the first-day-of-the-month price for each month in the years ended December 31, 2009 and 2010,
respectively. 46




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
      47




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##### Table of Contents



Internal Control Over Financial Reporting
 Managements Annual Report on Internal Control Over Financial Reporting. Internal ControlIntegrated
Framework
  Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated
Framework
   48




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##### Table of Contents



Internal Control  Integrated Framework
   
  Changes in Internal Control Over Financial Reporting.
 
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   http://www.bnymellon.com/ethics
 49




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
    Transfer Agentand RegistrarYear ended December 31,
    
    Trustees Fees
    
    Fees2008
    
    $
    155,432
    
    
    $
    6,3912009
    
    
    155,431
    
    
    
    6,0962010
    
    
    155,430
    
    
    
    5,291
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER
MATTERS
 Securities Authorized for Issuance under Equity Compensation Plans
  Unit Ownership of Certain Beneficial Owners
  Unit Ownership of Management
  50




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##### Table of Contents



Changes in Control
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
   
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2010
    
    
    2009Audit
    
    $
    154,788
    
    
    $
    151,216Audit related
    
    
    20,000
    
    
    
    20,000Tax
    
    
    200,000
    
    
    
    200,000Other
    
    
    
    
    
    
    $
    374,788
    
    
    $
    371,216
  
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   Report of Independent Registered Public Accounting FirmStatements of Assets, Liabilities and Trust Corpus as of December 31, 2010 and 2009Statements of Cash Earnings and
Distributions for the years ended December 31, 2010, 2009 and 2008Statements of Changes in Trust
Corpus for the years ended December 31, 2010, 2009 and 2008Notes to Financial Statements
   51




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##### Table of Contents



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, as amended May 8, 1989, among The British
Petroleum Company p.l.c., BP Exploration (Alaska) Inc., The Standard Oil Company and BP
Prudhoe Bay Royalty Trust.4.5
    
    Letter agreement executed October 13, 2006 between BP Exploration (Alaska) Inc. and The Bank
of New York, as Trustee.4.6
    
    Letter agreement executed January 11, 2008 between BP Exploration (Alaska) Inc. and The Bank
of New York, as Trustee.10.1
    
    Settlement Agreement, dated May 8, 2009, among BP Exploration (Alaska) Inc., The Bank of New
York Mellon, as Trustee, and BNY Mellon Trust Company of Delaware, as Co-Trustee.10.2
    
    Agreement of Resignation, Appointment and Acceptance dated as of December 15, 2010 among BP
Exploration (Alaska) Inc., The Bank of New York Mellon and The Bank of New York Mellon Trust
Company, N.A.31
    
    Rule 13a-14(a) certification.32
    
    Section 1350 certification.99
    
    Report of Miller and Lents, Ltd., dated February 18, 2011.101
    
    Explanatory note:An Interactive Data File is not submitted with this filing pursuant to Item
601(101) of Regulation S-K, because the Trust does not prepare its financial statements in
accordance with generally accepted accounting principles as used in the United States. See
Note 2 of Notes to Financial Statements in Part II, Item 8.
 52




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##### Table of Contents



SIGNATURES
  BP PRUDHOE BAY ROYALTY TRUSTBy:
    THE BANK  OF NEW YORK MELLON TRUST COMPANY, N.A., as TrusteeBy:
    /s/ Mike UlrichMike UlrichVice President   53




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description4.1
    
    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. 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, 2006 (File No.
1-10243).4.2
    
    Overriding Royalty Conveyance dated February 27, 1989 between BP Exploration (Alaska) Inc.
and The Standard Oil Company. 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,
2006 (File No. 1-10243).4.3
    
    Trust Conveyance dated February 28, 1989 between The Standard Oil Company and BP Prudhoe Bay
Royalty Trust. 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, 2006 (File No.
1-10243).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.
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, 2006 (File No. 1-10243).4.5
    
    Letter agreement executed October 13, 2006 between BP Exploration (Alaska) Inc. and The Bank
of New York, as Trustee. Incorporated by reference to the correspondingly numbered exhibit to
the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File
No. 1-10243).4.6
    
    Letter agreement executed January 11, 2008 between BP Exploration (Alaska) Inc. and The Bank
of New York, as Trustee. Incorporated by reference to the correspondingly numbered exhibit to
the Registrants Current Report on Form 8-K dated January 11, 2008 (File No. 1-10243).10.1
    
    Settlement Agreement, dated May 8, 2009, among BP Exploration (Alaska) Inc., The Bank of New
York Mellon, as Trustee, and BNY Mellon Trust Company of Delaware, as Co-Trustee. Incorporated
by reference to the correspondingly numbered exhibit to the Registrants Current Report on
Form 8-K dated May 8, 2009 (File No. 1-10243).10.2*
    
    Agreement of Resignation, Appointment and Acceptance dated as of December 15, 2010 among BP
Exploration (Alaska) Inc., The Bank of New York Mellon and The Bank of New York Mellon Trust
Company, N.A.31*
    
    Rule 13a-14(a) certification.32*
    
    Section 1350 certification.99*
    
    Report of Miller and Lents, Ltd., dated February 18, 2011.
 
 *
    
    Filed herewith.