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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION     Form 10-Q [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2004 OR [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition period from  to  . Commission file number 0-8565 Marine Petroleum Trust  Texas
(State or other jurisdiction
of incorporation or organization)
    
    75-6008017
(I.R.S. Employer
Identification No.)Bank of America, N.A.
P.O. Box 830650, Dallas, Texas
(Address of principal executive offices)
    
    75283-0650
(Zip Code)
 Registrants telephone number, including area code (800) 985-0794 None
(Former name, former address and former fiscal year
if changed since last report)    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]
    
    No [  ]
 Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ]
    
    No [X]
 Indicate number of units of beneficial interest outstanding as of the latest practicable date:
As of November 12, 2004, we had 2,000,000 units of beneficial interest outstanding.




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MARINE PETROLEUM TRUST INDEX PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)
    
    
    1Condensed Consolidated Balance Sheets as of September 30, 2004 and June 30, 2004
    
    
    1Condensed Consolidated Statements of Income and Undistributed Income for the Three Months
Ended September 30, 2004 and 2003
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2004
and 2003
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    5Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    8Item 4. Controls and Procedures
    
    
    8PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    9Certification of the Principal Accounting Officer Pursuant to Section 302Certification of the Corporate Trustee Pursuant to Section 302Certification of the Principal Accounting Officer Pursuant to Section 906Certification of the Corporate Trustee Pursuant to Section 906




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements MARINE PETROLEUM TRUST AND SUBSIDIARY 
 CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2004 and June 30, 2004
(Unaudited)
 September 30,
    
    June 30,2004
    
    2004ASSETSCurrent Assets:Cash and cash
equivalents
    
    $
    1,101,280
    
    
    $
    1,202,855Oil and gas
royalties
receivable
    
    
    862,113
    
    
    
    965,995Receivable from
affiliate
    
    
    79,335
    
    
    
    70,419State and federal
taxes
refundable
    
    
    
    
    
    
    578Interest
receivable
    
    
    6,513
    
    
    
    2,134Total current
assets
    
    $
    2,049,241
    
    
    $
    2,241,981Investment in U.S.
Treasury and agency
bonds
    
    
    302,290
    
    
    
    304,606Investment in
affiliate
    
    
    369,807
    
    
    
    367,210Office equipment, at
cost less
accumulated
depreciation
    
    
    2,400
    
    
    
    2,400Producing oil and
gas
properties
    
    
    7
    
    
    
    7$
    2,723,745
    
    
    $
    2,916,204LIABILITIES AND
TRUST EQUITYCurrent Liability 
accounts
payable
    
    $
    77
    
    
    $
    Trust
Equity:Corpus 
authorized
2,000,000 units
of beneficial
interest,
issued 2,000,000
units at
nominal
value
    
    
    8
    
    
    
    8Undistributed
income
    
    
    2,723,660
    
    
    
    2,916,196Total trust
equity
    
    
    2,723,668
    
    
    
    2,916,204$
    2,723,745
    
    
    $
    2,916,204
 See accompanying notes to condensed consolidated financial statements. 1




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MARINE PETROLEUM TRUST AND SUBSIDIARY 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND UNDISTRIBUTED INCOME
 For the Three Months Ended September 30, 2004 and 2003
(Unaudited) Three Months EndedSeptember 30,2004
    
    2003Income:Oil and gas royalties
    
    $
    1,065,738
    
    
    $
    1,175,076Equity in earnings of affiliate
    
    
    77,478
    
    
    
    55,667Interest income
    
    
    4,808
    
    
    
    8,5431,148,024
    
    
    
    1,239,286Expenses:General and administrative
    
    
    50,757
    
    
    
    41,664Income before Federal income taxes
    
    
    1,097,267
    
    
    
    1,197,622Federal income taxes of subsidiary
    
    
    
    
    
    
    Net income
    
    
    1,097,267
    
    
    
    1,197,622Undistributed income at beginning of year
    
    
    2,916,196
    
    
    
    3,779,3514,013,463
    
    
    
    4,976,973Distributions to unitholders
    
    
    1,289,803
    
    
    
    1,555,119Undistributed income at end of year
    
    $
    2,723,660
    
    
    $
    3,421,854Net income per unit
    
    $
    0.55
    
    
    $
    0.60Distributions per unit
    
    $
    0.64
    
    
    $
    0.78
 See accompanying notes to condensed consolidated financial statements. 2




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MARINE PETROLEUM TRUST AND SUBSIDIARY 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended September 30, 2004 and 2003
 (Unaudited)
 Three Months EndedSeptember 30,2004
    
    2003Cash flows from operating activities:Net
income
    
    $
    1,097,267
    
    
    $
    1,197,622Adjustments to reconcile net income to net cash provided
by operating activities:Equity in undistributed earnings of
affiliate
    
    
    (2,597
    )
    
    
    40,847Amortization of
premium
    
    
    2,316
    
    
    
    2,281Change in assets and liabilities:Oil and gas royalties
receivable
    
    
    103,882
    
    
    
    67,159Receivable from
affiliate
    
    
    (8,916
    )
    
    
    36,576State and federal taxes
refundable
    
    
    578
    
    
    
    Interest
receivable
    
    
    (4,379
    )
    
    
    (4,324
    )Accounts
payable
    
    
    77
    
    
    
    864Net cash provided by operating
activities
    
    
    1,188,228
    
    
    
    1,341,025Cash flows from financing activitiesdistributions to
unitholders
    
    
    (1,289,803
    )
    
    
    (1,555,119
    )Net decrease in cash and cash
equivalents
    
    
    (101,575
    )
    
    
    (214,094
    )Cash and cash equivalents at beginning of
period
    
    
    1,202,855
    
    
    
    1,334,059Cash and cash equivalents at end of
period
    
    $
    1,101,280
    
    
    $
    1,119,965
 See accompanying notes to condensed consolidated financial statements. 3




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MARINE PETROLEUM TRUST AND SUBSIDIARY 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2004
 (Unaudited)
 Accounting Policies The financial statements include the financial statements of Marine
Petroleum Trust (the Trust) and its wholly-owned subsidiary, Marine Petroleum
Corporation (MPC). The financial statements are condensed and should be read
in conjunction with the Trusts annual report on Form 10-K for the fiscal year
ended June 30, 2004. The financial statements included herein are unaudited,
but in the opinion of management they include all adjustments necessary for a
fair presentation of the results of operations for the periods indicated.
Operating results for the three months ended September 30, 2004 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 2005. As an overriding royalty owner, actual production results are not known to
us until reported by the operator, which could be a period of 60-90 days later
than the actual month of production. To comply with accounting principles
generally accepted in the United States of America, we must estimate earned but
unpaid royalties from this production. To estimate this amount, we utilize
historical information based on the latest production reports from the
individual leases and current average prices as reported for oil by
ChevronTexaco and the well head price for natural gas as reported by the Energy
Information Agency, a division of the U.S. Department of Energy for the period
under report. Distributable Income The Trusts Indenture provides that the 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 on the 28th day of March, June,
September and December of each year. If the 28th falls on a Saturday, Sunday
or legal holiday, the distribution is payable on the immediately preceding
business day. As stated under Accounting Policies above, the financial statements in
this Form 10-Q are the condensed and consolidated account balances of the Trust
and MPC. However, distributable income is paid from the unconsolidated account
balances of the Trust. Distributable income is comprised of (i) royalties from
offshore Texas leases owned directly by the Trust, (ii) 98% of the overriding
royalties received by MPC that are paid to the Trust on a quarterly basis,
(iii) cash distributions from the Trusts equity interest in the Tidelands
Royalty Trust B (Tidelands), a separate publicly traded royalty trust, (iv)
dividends paid by MPC, less (v) administrative expenses incurred by the Trust. Undistributed Income A contract between the Trust and MPC provides that 98% of the overriding
royalties received by MPC are paid to the Trust each quarter. MPC retains the
remaining 2% of the overriding royalties along with other items of income and
expense until such time as the Board of Directors declares a dividend out of
the retained earnings. Beginning in the first quarter of 2004 the Board of
Directors has declared quarterly dividends equal to 2% of overriding royalties
collected each quarter. On September 30, 2004, undistributed income of the
Trust and MPC amounted to $1,806,197 and $917,463, respectively. 4




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Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations Financial Condition  Liquidity and Capital Resources The Trust is a royalty trust that was created in 1956 under the laws of
the State of Texas. 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, the Gulf interests now are held by
ChevronTexaco Corporation, Elf Exploration, Inc., and their assignees. The Trusts rights are generally referred to as overriding royalty
interests in the oil and natural gas industry. An overriding royalty interest
is created by an assignment by the owner of a working interest. The ownership
rights associated with an overriding royalty interest terminate when the
underlying lease terminates. All production and marketing functions are
conducted by the working interest owners of the leases. Revenues from the
overriding royalties are paid to the Trust 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. The Trust 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 65 leases covering 239,208 gross acres located in the Gulf of
Mexico. The Trusts overriding royalty interest applies only to existing
leases and does not apply to new leases. The Trust also owns a 32.6% equity
interest in Tidelands. Tidelands has an overriding royalty interest in seven
leases covering 27,948 gross acres located in the Gulf of Mexico. As a result
of this ownership, the Trust receives periodic distributions from Tidelands. Due to the limited purpose of the Trust as stated in the Trusts
Indenture, there is no requirement for capital. The Trusts only obligation is
to distribute to unitholders the net income actually collected. As an
administrator of oil and natural gas royalty properties, the Trust collects
royalties monthly, pays administration expenses, and disburses all net
royalties collected to its unitholders each quarter. Because all of the
Trusts revenues are invested in liquid funds pending distribution, the Trust
does not experience any liquidity problems. The Trusts Indenture (and MPCs charter and by-laws) expressly prohibits
the operation of any kind of trade or business. The Trusts oil and natural
gas properties are depleting assets and are not being replaced due to the
prohibition against these investments. Because of these restrictions, the
Trust does not require short term or long term capital. These restrictions,
along with other factors, allow the Trust to be treated as a grantor trust.
Thus, all income and deductions, for tax purposes, should flow through to each
individual unitholder. The Trust is not a taxable entity. Critical Accounting Policies As an overriding royalty owner, actual production results are not known to
us until reported by the operator, which could be a period of 60-90 days later
than the actual month of production. To comply with accounting principles
generally accepted in the United States of America, we must estimate earned but
unpaid royalties from this production. To estimate this amount, we utilize
historical information based on the latest production reports from the
individual leases and current average prices as reported for oil by Chevron USA
and the well head price for natural gas as reported by the Energy Information
Agency, a division of the U.S. Department of Energy for the period under
report. We did not have any changes in our critical accounting policies or in our
significant accounting estimates during the three months ended September 30,
2004. Please see our annual report on Form 10-K for the year ended June 30,
2004 for a detailed discussion of our critical accounting policies. 5




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General The Trust realized 49% of its revenue from the sale of oil and 51% from
the sale of natural gas during the three months ended September 30, 2004.
Revenue includes estimated royalties of oil and natural gas produced but not
paid. Distributions fluctuate from quarter to quarter due to changes in oil and
natural gas prices and production quantities. Net income is determined by the
revenue from oil and natural gas produced and sold during the accounting
period. Distributions, however, are determined by the cash available to the
Trust on the determination date. Summary Review of Operating Results Net income for the three months ended September 30, 2004 decreased
approximately 8% to $.55 per unit as compared to $.60 for the comparable period
in 2003. Oil production for the three months ended September 30, 2004
decreased approximately 8,000 barrels and natural gas production decreased
approximately 42,000 mcf from the levels realized in the comparable period in
2003. For the three months ended September 30, 2004 the average price realized
for a barrel of oil increased $18.49 over the price realized in the comparable
period in 2003 and the average price realized for a thousand cubic feet (mcf)
of natural gas increased $.78 over the price realized in the comparable period
in 2003. Distributions to unitholders amounted to $.64 per unit for the three
months ended September 30, 2004, a decrease of approximately 18% over the $.78
distribution for the comparable period in 2003. The Trust must rely on public records for information regarding drilling
operations. The public records available up to the date of this report indicate
that 6 drilling and workover operations were conducted successfully during the
three months ended September 30, 2004 on leases in which the Trust has an
interest. There are approximately 380 wells subject to the Trusts overriding
royalty interest that are listed as active oil or natural gas wells on the
records of the Minerals Management Service. The following table presents the net production quantities of oil and
natural gas and net income and distributions per unit for the last five
quarters. Production (1)Natural
    
    Net
    
    CashQuarter
    
    Oil (bbls)
    
    Gas (mcf)
    
    Income
    
    DistributionSeptember 30, 2003
    
    
    19,945
    
    
    
    141,921
    
    
    
    .60
    
    
    
    .78December 31,
2003(2)
    
    
    18,090
    
    
    
    151,139
    
    
    
    .69
    
    
    
    .76March 31,
2004(2)
    
    
    7,049
    
    
    
    68,638
    
    
    
    .31
    
    
    
    .56June 30,
2004
    
    
    17,074
    
    
    
    113,173
    
    
    
    .60
    
    
    
    .53September 30,
2004
    
    
    11,762
    
    
    
    100,176
    
    
    
    .55
    
    
    
    .64
   (1)
    
    Excludes the Trusts equity interest in Tidelands.(2)
    
    Due to accelerated payments received from ChevronTexaco in December 2003
approximately 3,500 barrels of oil and 26,000 mcf of natural gas were
realized in the quarter ended December 31, 2003 that would normally have
been realized in the quarter ended March 31, 2004. As a result of this
acceleration $.13 net income per unit was realized in the quarter ended
December 31, 2003 that would normally have been realized in the quarter
ended March 31, 2004. The Trusts revenues are derived from the oil and natural gas production
activities of unrelated parties. The Trusts revenues and distributions
fluctuate from period to period based upon factors beyond the Trusts control,
including, without limitation, the number of productive wells drilled and
maintained on leases subject to the Trusts interest, the level of production
over time from such wells and the prices at which the oil and natural gas from
such wells are sold. The Trust believes that it will continue to have enough
revenues to allow distributions to be made to 6




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unitholders for the foreseeable future, although no assurance can be made
regarding the amount of any future distributions. The foregoing sentence is a
forward-looking statement. For more information, see Forward-Looking
Statements on page 8. Actual results may differ from expected results
because of reductions in the price or demand for oil and natural gas, which
might then lead to decreased production; 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; and the
expiration or release of leases subject to the Trusts interests. Important aspects of the Trusts operations are conducted by third
parties. Oil and natural gas companies that lease tracts subject to the
Trusts interests are responsible for the production and sale of oil and
natural gas and the calculation of royalty payments to the Trust. Prior to
November 1, 2004, the Trusts distributions were processed and paid by The Bank
of New York as the agent for the trustee of the Trust. Effective November 1,
2004, Mellon Investor Services LLC became the agent for the trustee of the
Trust and distributions will be processed and paid by Mellon Investor Services
LLC. Results of OperationsThree Months Ended September 30, 2004 and 2003 Net income decreased 8% to approximately $1,097,000 for the three months
ended September 30, 2004, from approximately $1,198,000 realized for the
comparable three months in 2003. The Trusts revenue is dependent on the operations of the working interest
owners of the leases burdened with the Trusts overriding royalty interest.
The only obligation of the working interest owners to the Trust is to make
monthly overriding royalty payments of the Trusts interest in the oil and
natural gas sold. The volume of oil and gas produced and its selling price are
primary factors in the calculation of overriding royalty payments. Production
is affected by the declining capability of the producing wells, the number of
new wells drilled, the number of existing wells re-worked and placed back in
production. The Trust has experienced a steady decline in the volume of oil and
natural gas produced from the wells subject to the Trusts overriding royalty interest.
In the current three month period oil production declined 41% and natural gas
production declined 29% from the levels realized in the comparable three months
a year ago. Production from existing wells is anticipated to continue to
decrease in the future due to normal well depletion. Marine has no input with
the operators regarding future drilling operations which could impact Marines
future oil and natural gas production. Revenue from oil royalties, excluding the Trusts equity interest in
Tidelands, for the three months ended September 30, 2004 increased 2% to
approximately $517,000, from approximately $508,000 realized for the comparable
three months in 2003. There was a 41% decrease in production and a 73%
increase in the price realized in the current quarter as compared to the
comparable quarter in 2003. Revenue from natural gas royalties, excluding the Trusts equity interest
in Tidelands, decreased 18% to approximately $549,000 from approximately
$667,000 for the comparable three months in 2003. There was a 29% decrease in
production and a 17% increase in the price realized. Income from the Trusts equity in Tidelands decreased approximately 39%
for the three months ended September 30, 2004, as compared to the comparable
three months of 2003. Weather was a factor in the production of both oil and natural gas during
the current quarter. The Trust does not have enough information to determine
exactly how much production was affected. The main force of Hurricane Ivan did
not hit the area where the Trusts interests are located. However, some loss
of production was experienced due to evacuation of personnel from the producing
platforms and the necessity of stopping production until the storm moved out of
the area. The following table presents the quantities of oil and natural gas sold
and the average price realized from current operations for the three months
ended September 30, 2004, and those realized in the comparable three months in
2003, excluding the Trusts equity interest in Tidelands. 7




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Three Months Ended September 30,2004
    
    2003OILBarrels sold
    
    
    11,762
    
    
    
    19,945Average
price
    
    $
    43.95
    
    
    $
    25.46NATURAL GASMcf
sold
    
    
    100,176
    
    
    
    141,921Average
price
    
    $
    5.48
    
    
    $
    4.70
 Forward-Looking Statements The statements discussed in this quarterly report on Form 10-Q regarding
our future financial performance and results, and other statements that are not
historical facts, are forward-looking statements as defined in Section 27A of
the Securities Act of 1933. We use the words may, will, expect,
anticipate, estimate, believe, continue, intend, plan, budget, or
other similar words to identify forward-looking statements. You should read
statements that contain these words carefully because they discuss future
expectations, contain projections of our financial condition, and/or state
other forward-looking information. Events may occur in the future that we
are unable to accurately predict, or over which we have no control. If one or
more of these uncertainties materialize, or if underlying assumptions prove
incorrect, actual outcomes may vary materially from those forward-looking
statements included in this Form 10-Q. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk As described elsewhere herein, the Trusts only function is to collect
overriding royalties from leases operated by others and distribute those
royalties to its unitholders after paying the cost of collection and
administration. The Trusts income is highly dependent on the prices realized
from the sale of oil and natural gas. Oil and natural gas prices have
historically experienced significant volatility. The Trust does not attempt to
manage its commodity price risk through the use of fixed price contracts or
financial derivatives. Due to the short span of time between receipts and disbursements, cash
held by the Trust is held in a non-interest bearing trust account. Oil and natural gas royalties received by MPC prior to payment of the 98%
net profits interest are held in money market accounts that invest in U.S.
Treasury securities and are considered not at risk. The retained earnings of MPC are held in either money market accounts or
U.S. Treasury or agency securities to be held to maturity. Funds held in money
market accounts and U.S. Treasury securities that mature in less than one year
are considered not at risk. However, on September 30, 2004 MPC held $200,000
of U.S. Treasury securities with an interest rate of 5.75% that mature on
November 15, 2005. If held to maturity these securities are believed to be not
at risk. Should a need arise for these funds before they mature and if
interest rates increase, there is, under these conditions, a possible market
risk. The market value of these securities on September 30, 2004 was $207,718. 
 Item 4. Controls and Procedures As of the end of the period covered by this report, the Trustee carried
out an evaluation of the effectiveness of the design and operation of the
Trusts disclosure controls and procedures pursuant to Exchange Act Rules
13a-15 and 15d-15. Based upon that evaluation, the Trustee concluded that the
Trusts disclosure controls and procedures are effective in timely alerting the
Trustee to material information relating to the Trust required to be included
in the Trusts periodic filings with the Securities and Exchange Commission.
There has not been any change in the Trusts internal control over financial
reporting during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the Trusts internal
control over financial reporting. 8




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PART II. OTHER INFORMATION 
 Item 6. Exhibits The following exhibits are included herein:  31.1
    
    Certification of the Principal Accounting Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Corporate Trustee pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Principal Accounting Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Corporate Trustee pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. 9




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. MARINE PETROLEUM TRUSTBank of America, N.A., TrusteeNovember 12, 2004
    
    
    
    By:
    
    /s/ RON E. HOOPERRon E. HooperSenior Vice PresidentNovember 12, 2004
    
    
    
    By:
    
    /s/ R. RAY BELLR. Ray BellPrincipal Accounting Officer
 10




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Marine Petroleum Trust
c/o Bank of America, N.A.
P.O. Box 830650
Dallas, Texas 75283-0650 11