BP PRUDHOE BAY ROYALTY TRUST Introduction
BP Prudhoe Bay Royalty Trust (the "Trust"), a grantor trust, was created as aDelaware business trust pursuant to a Trust Agreement datedFebruary 28, 1989 (the "Trust Agreement"), amongThe Standard Oil Company ("Standard Oil"),BP Exploration (Alaska) Inc. ("BP Alaska ") (now known asHilcorp North Slope, LLC ("HNS")),The Bank of New York Mellon , as trustee, andBNY Mellon Trust of Delaware (successor toThe Bank of New York (Delaware )), as co-trustee. OnDecember 15, 2010 ,The Bank of New York Mellon resigned as trustee and was replaced byThe Bank of New York Mellon Trust Company, N.A. , a national banking association, as successor trustee (the "Trustee"). At the time of formation of the Trust, Standard Oil andBP Alaska were indirect, wholly-owned subsidiaries of BP p.l.c. ("BP"). OnAugust 27, 2019 , BP announced that it had agreed to sellBP Alaska and its other assets and operations inAlaska for total consideration of$5.6 billion toHilcorp Alaska, LLC and its affiliates, which are affiliates ofHouston -basedHilcorp Energy Company (collectively "Hilcorp"). OnJune 30, 2020 , Hilcorp completed its acquisition of BP's entire upstream business inAlaska , including BP's interest inBP Alaska , which owned all of BP's upstream oil and gas interest inAlaska (including oil and gas leases in thePrudhoe Bay field), and onDecember 18, 2020 , an affiliate of Hilcorp completed its acquisition of BP's midstream business inAlaska . OnJuly 1, 2020 ,BP Alaska , aDelaware corporation, converted to aDelaware limited liability company and changed its name toHilcorp North Slope, LLC , a wholly-owned subsidiary ofHilcorp Alaska, LLC . Hilcorp and its affiliates employ approximately 1,400 full-time employees inAlaska . Under the terms of the Trust Agreement, HNS is the successor toBP Alaska . For purposes of this Quarterly Report on Form 10-Q, "HNS" means (i) at all times prior toJune 30, 2020 ,BP Alaska , and (ii) at all times after and includingJune 30, 2020 ,Hilcorp North Slope, LLC (formerly known asBP Alaska ). The information in this report relating to the Prudhoe Bay Unit, the calculation of Royalty Payments and certain other matters has been furnished to the Trustee by HNS, and the Trustee is entitled to rely on the accuracy of such information in accordance with the Trust Agreement.
Recent Developments
The average daily closing WTI price was above the "break-even" price for the second quarter endedJune 30, 2022 , resulting in a quarterly payment with respect to the Royalty Interest of$30,341,265 to the Trust, after the addition of$7,291 representing an underpayment to the Trust for quarter endedMarch 31, 2022 . Because this revenue was not received by the Trust untilJuly 15, 2022 , it will be recorded in the third quarter of 2022. In accordance with the Trust Agreement, the Trustee paid all accrued expenses of the Trust throughJune 30, 2022 , and then distributed the excess of the cash received by the Trust over the Trust's expenses, net of any additions to the cash reserve established for the payment of estimated liabilities before making a quarterly distribution to Unit holders. After paying the Trust's expenses accrued throughJune 30, 2022 and applying accrued interest,$30,065,952 was available for distribution to unitholders. Although no addition was made to the cash reserve with respect to the Royalty Payment attributable to the second quarter of 2022, the Trustee continues to evaluate the adequacy of the cash reserve and may need to increase the amount of the cash reserve further in the future. See Note 2 to the Financial Statements (Unaudited) in Item 1.
For the three months ended
Average WTI Price $ 108.70
Average Adjusted Chargeable Costs $ 72.02
Average Production Taxes $ 7.21
Average Per Barrel Royalty $ 29.47
Average Net Production (mb/d) 68.8
Although the Trust received net revenues attributable to the quarters ended June
30, 2021 , September 30, 2021 , December 31, 2021 , March 31, 2022 , and June 30,
2022 , there can be no assurance that WTI Prices will remain at levels sufficient
to result in Royalty Payments to the Trust in any future quarter.
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Forward-Looking Statements
Various sections of this report contain forward-looking statements (that is, statements anticipating future events or conditions and not statements of historical fact) within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Words such as "anticipate," "estimates," "expect," "believe," "intend," "likely" "plan", "predict" or "project," and "should," "would," "could," "potentially," "possibly" or "may," and other words that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements in this report are subject to a number of risks and uncertainties beyond the control of the Trustee. These risks and uncertainties include such matters as future changes in oil prices, oil production levels, production charges and costs, changes in expenses of the Trust, cash reserve targets and the timing of the termination of the Trust, economic conditions, domestic and international political events and developments, legislation and regulation, international hostilities, war, including, without limitation,Russia's large-scale invasion ofUkraine onFebruary 24, 2022 and the international responses thereto, including the imposition of international sanctions, developments in the COVID-19 pandemic, including the emergence of more contagious or virulent strains of the virus and the availability, uptake, and efficacy of vaccines. The actual results, performance and prospects of the Trust could differ materially from those expressed or implied by forward-looking statements. Descriptions of some of the risks that could affect the future performance of the Trust appear in Item 1A, "RISK FACTORS," of the Trust's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 (the "2021 Annual Report"). There may be additional risks of which the Trustee is unaware or which it currently deems immaterial. In the light of these risks, uncertainties and assumptions, you should not rely unduly on any forward-looking statements. Forward-looking events and outcomes discussed in the 2021 Annual Report and in this report and the Trust's other reports may not occur or may turn out differently. The Trustee undertakes no obligation to update forward-looking statements after the date of this report, except as required by law, and all such forward-looking statements in this report are qualified in their entirety by the preceding cautionary statements.
Liquidity and Capital Resources
Background. The Trust is a passive entity. The Trustee's activities are limited to collecting and distributing the revenues from the Royalty Interest and paying liabilities and expenses of the Trust. Generally, the Trust has no source of liquidity and no capital resources other than the revenues attributable to the Royalty Interest that it receives from time to time. See the discussion under "THE ROYALTY INTEREST" in Part I, Item 1 of the 2021 Annual Report for a description of the calculation of the Per Barrel Royalty, and the discussion under "THEPRUDHOE BAY UNIT AND FIELD - Reserve Estimates" in Part I, Item 1 of the 2021 Annual Report for information concerning the estimated future net revenues of the Trust. However, the Trust Agreement gives the Trustee power to borrow, establish a cash reserve, or dispose of all or part of the Trust property under limited circumstances. See the discussion under "THE TRUST - Sales of Royalty Interest; Borrowings and Reserves" in Part I, Item 1 of the 2021 Annual Report. Cash Reserve. InJuly 1999 , the Trustee established a cash reserve to provide liquidity to the Trust during future periods in which the Trust does not receive sufficient revenues from the Royalty Interest. The Trustee has drawn funds from the cash reserve account during the quarters in which the quarterly revenues received by the Trust did not exceed the liabilities and expenses of the Trust, and has replenished and added to the reserve from deductions from quarterly distributions made to Unit holders during periods when the Trust received revenues from the Royalty Interest and Unit holders received distributions. 10
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Due in part to the economic impacts of the COVID-19pandemic, the markets experienced a decline in oil prices in response to oil demand concerns and global storage considerations. As a result of, among other things, lower oil prices and the increase in Chargeable Costs, the Trust received no revenues from the Royalty Interest attributable to the four quarters of 2020 or the first quarter of 2021. Consequently, the Trust was unable to make any additions to the funds on deposit in the cash reserve account since theJanuary 2020 distribution made for revenues from the Royalty Interest attributable to the fourth quarter of 2019. InDecember 2020 , the remaining funds on deposit in the cash reserve were insufficient to pay the Trustee's fees and administrative fees, expenses, charges and costs, including accounting, engineering, legal, financial advisory, and other professional fees incurred in connection with the Trust ("Administrative Expenses") in 2020 and the Trustee made a demand for indemnity and reimbursement of Administrative Expenses upon HNS in accordance with the Trust Agreement in the amount of$537,835 , representing the Trust's unpaid expenses throughDecember 18, 2020 . Following the receipt of the indemnity payment from HNS inDecember 2020 , the Trust continued to accrue Administration Expenses but did not receive any revenues from the Royalty Interest untilJuly 2021 , when the Trust received a quarterly payment of approximately$3.2 million attributable to the quarter endedJune 30, 2021 . InJuly 2021 , the Trust announced that the Trustee had determined to increase the Trustee's existing cash reserve of$1.27 million by$500 thousand , funding the full amount of the cash reserve from the Royalty Payment attributable to the second quarter of 2021. InOctober 2021 , the Trust determined to increase the Trustee's existing cash reserve to$6.0 million , which was fully funded from the Royalty Payment attributable to the third quarter of 2021. The total amounts added to the cash reserve in July andOctober 2021 took into account that (i) the Trust had not received any revenues attributable to 2020 or the first quarter of 2021 and therefore had been unable to make any additions to the cash reserve for the prior five quarters, (ii) the likelihood of future revenue from the Royalty Interest, (iii) the increase in Trust Administrative Expenses in 2020, (iv) the reset of the earliest potential termination date of the Trust, and (v) the expected expenses associated with the future termination of the Trust. The Trustee will continue to review and reassess the adequacy of the cash reserve on an on-going basis based on the facts and circumstances at the time of such evaluations and may increase or decrease the targeted cash reserve or the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the Unit holders. As previously disclosed by the Trust, the Trustee has increased and funded the cash reserve to a level it believes is sufficient to provide funding to pay the Administrative Expenses for a two year period commencing when the sum of the net revenues from the Royalty Interest for two successive years are less than$1 million per year, and to carry out an orderly termination of the Trust as set forth in Article IX of the Trust Agreement. Depending on the facts and circumstances at the time, the expenses of the termination process may include, without limitation, costs related to a professional evaluation of the value of the Royalty Interest, any and all other costs and expenses necessary to terminate the Trust, sell the Trust assets and provide for the orderly distribution of the remaining proceeds to the Unit holders, the costs of one or more consent solicitations of the Unit holders, legal fees and expenses, and all other professional services necessary to comply with the requirements of the Trust termination process. Given the uncertainty with respect to the amount or timing of any future revenue from the Royalty Interest combined with the expenses of operating the Trust prior to termination and the limited ability to terminate the Trust in accordance with its terms, the Trustee has determined to withhold amounts necessary, when received by the Trust, to maintain the cash reserve at its current level of approximately$6.0 million at this time. This cash reserve level assumes an orderly termination of the Trust sometime in the future based on current facts and circumstances, and if the receipt of additional Royalty Payments continues to reset that time line, the Trustee will re-evaluate the adequacy of the cash reserve balance and may increase or decrease it without notice to Unit holders. Accordingly, even if the Trust receives revenues from the Royalty Interest during the remainder of 2022 or beyond, it is possible that Unit holders will not receive a distribution on outstanding Units during such periods, because the Trust may need to withhold funds from any such revenue to first pay accrued Administrative Expenses and to replenish or add to the cash reserve, before distributing any funds to Unit holders. There can be no assurance that WTI prices will be at levels sufficient to result in revenues to the Trust in any future quarter. 11
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The Trustee intends to keep the cash reserve program in place until termination of the Trust.
Cash held in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of accrued Administrative Expenses and future known, anticipated or contingent expenses or liabilities eventually will be distributed to Unit holders, together with interest earned on the funds. Any amounts set aside for the cash reserve are invested by the Trustee inU.S. government or agency securities secured by the full faith and credit ofthe United States , or mutual funds investing in such securities.
Results of Operations
Relatively modest changes in oil prices significantly affect the Trust's revenues and results of operations. Crude oil prices are subject to significant changes in response to fluctuations in the domestic and world supply and demand and other market conditions as well as the world political situation, particularly the invasion ofUkraine byRussia , as it affects OPEC+ and other producing countries. The effect of changing political and economic conditions on the demand and supply for energy throughout the world and future prices of oil cannot be accurately projected. Royalty revenues are generally received on the Quarterly Record Date (generally the fifteenth day of the month) following the end of the calendar quarter in which the related Royalty Production occurred. The Trustee, to the extent possible, pays all expenses of the Trust for each quarter on the Quarterly Record Date on which the revenues for the quarter are received. For the statement of cash earnings and distributions, revenues and Trust expenses are recorded on a cash basis and, as a result, distributions shown for the three-month and six-month periods endedJune 30, 2022 and 2021, respectively, are attributable to HNS's operations during the three-month and six-month periods endedMarch 31, 2022 and 2021, respectively. Under the terms of the Conveyance of the Royalty Interest to the Trust, the Per Barrel Royalty for any day is the WTI Price for the day less the sum of (i) Chargeable Costs multiplied by the Cost Adjustment Factor and (ii) Production Taxes. The narrative under the captions "THE TRUST - Trust Property" and "THE ROYALTY INTEREST" in the 2021 Annual Report explains the meanings of the terms "Conveyance," "Royalty Interest," "Per Barrel Royalty," "WTI Price, "Chargeable Costs" and "Cost Adjustment Factor" and should be read in conjunction with this report. 12
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"Royalty Production" for each day in a calendar quarter is 16.4246% of the first 90,000 barrels of the actual average daily net production of oil and condensate for the quarter from the proved reserves allocated to the Trust. When HNS's average net production of oil and condensate per quarter from the 1989 Working Interests exceeds 90,000 barrels a day, the principal factors affecting the Trust's revenues and distributions to Unit holders are changes in WTI Prices, scheduled annual increases in Chargeable Costs, changes in the Consumer Price Index and changes in Production Taxes. However, the Trust's revenues have also been affected by decreases in production from the 1989 Working Interests. HNS's net production of oil and condensate allocated to the Trust from proved reserves was less than 90,000 barrels per day on an annual basis during 2018, 2019, 2020 and 2021, and for the first and second quarters of 2022. The Trustee has been advised that HNS expects that average net production allocated to the Trust from the proved reserves will be less than 90,000 barrels a day on an annual basis in future years. This is due to the normal declining production rate from thePrudhoe Bay field and variance in the impacts of planned and unplanned maintenance programs. The "break-even" (the price at which all taxes and prescribed deductions are equal to the WTI Price) WTI Price changes over time primarily as a result of changes in the Cost Adjustment Factor, which is based on the Consumer Price Index published for the most recently past February, May, August or November and Production Taxes, as Chargeable Costs remain constant for the calendar year. Additionally, as WTI Prices change, so do the Production Taxes and prescribed deductions, potentially increasing or decreasing the "break-even" WTI Price. The quarterly Royalty Payment by HNS to the Trust is the sum of the individual revenues attributed to the Trust as calculated each day during the quarter. Any single calculation of a calendar day will not reflect the value of the dividend paid to the Trust for the quarter, nor will it reflect the estimated future value of the Trust. From the beginning of the first quarter of 2022 throughMarch 31, 2022 , the closing WTI crude oil spot price fluctuated between a high of$123.70 per barrel onMarch 8, 2022 and a low of$75.21 per barrel on each ofJanuary 1 andJanuary 2, 2022 and on average was above the "break-even" level necessary for the Trust to receive a Per Barrel Royalty for the first quarter of 2022, which was paid to the Trust onApril 15, 2022 . From the beginning of the second quarter of 2022 throughJune 30, 2022 , the closing WTI crude oil spot price fluctuated between a high of$122.11 per barrel onJune 8, 2022 and a low of$94.29 per barrel onApril 11, 2022 and on average was above the "break-even" level necessary for the Trust to receive a Per Barrel Royalty for the second quarter of 2022, which was paid to the Trust onJuly 15, 2022 . Whether the Trust will be entitled to future net revenue from the Royalty Interest during the remainder of 2022 will depend on, among other things, WTI Prices prevailing during the remainder of the year. While future oil prices cannot be accurately projected, theU.S. Energy Information Administration forecasts in its Short-Term Energy Outlook, released onJuly 12, 2022 , that WTI prices will average approximately$98.77 per barrel and$92.30 per barrel in the third and fourth quarters of 2022, respectively. There can be no assurance that WTI prices for the third or fourth quarter of 2022 or beyond will be above the "break even" level necessary for the Trust to receive a Per Barrel Royalty. HNS estimates Royalty Production from the 1989 Working Interests for purposes of calculating quarterly Royalty Payments to the Trust because complete actual field production data for the preceding calendar quarter generally is not available by the Quarterly Record Date. To the extent that average net production from the 1989 Working Interests is below 90,000 barrels per day, calculation by HNS of actual Royalty Production data may result in revisions of prior Royalty Production estimates. Revisions by HNS of its Royalty Production calculations may result in quarterly Royalty Payments by HNS which reflect adjustments for overpayments or underpayments of royalties with respect to prior quarters. Such adjustments, if material, may adversely affect certain Unit holders who buy or sell Units between the Quarterly Record Dates for the Quarterly Distributions affected. The quarterly distribution received by the Trust from HNS inApril 2022 was adjusted by HNS to compensate for the underpayment of royalties due to the Trust with respect to the quarter endedDecember 31, 2021 . See Note 7 of Notes to Financial Statements (Unaudited) in Item 1. Because the statements of cash earnings and distributions of the Trust are prepared on a modified cash basis, royalty revenues for the three-month and six-month periods endedJune 30, 2022 and 2021 reflect the amount of the adjustments with respect to the earlier fiscal periods. 13
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The following table summarizes the factors which determined the Per Barrel Royalty used to calculate payments, if any, received by the Trust in April andJanuary 2022 and 2021. See Note 1 of Notes to Financial Statements (Unaudited) in Item 1. The information in the table has been furnished to the Trust by HNS. Data for Quarter Average Average Based on Per Average Data for Average Cost Adjusted Average Barrel Net Quarter WTI Chargeable Adjustment Chargeable Production Royalty Production Royalty Payment in Month Ended Price Costs Factor Costs Taxes (paid) (mb/d) April 2022 03/31/22$ 94.45 $ 32.00 2.1846$ 69.91 $ 3.42 $ 21.12 73.5 Jan 2022 12/31/21$ 76.91 $ 29.25 2.1402$ 62.60 $ 2.73 $ 11.57 71.4 April 2021 03/31/21$ 57.82 $ 29.25 2.0252$ 59.24 $ 1.99 $ 0.00 74.7 Jan 2021 12/31/20$ 42.66 $ 26.50 2.0038$ 53.10 $ 1.39 $ 0.00 74.8
Three Months Ended
Royalty Production
Trust royalty revenues received during the second quarter of the fiscal year are based on Royalty Production during the first quarter of the fiscal year. The following table shows the changes between the three months endedMarch 31, 2022 and the three months endedMarch 31, 2021 in the factors that determined the Per Barrel Royalties used to calculate the Royalty Payment received by the Trust during the quarters endedJune 30, 2022 and 2021. Increase (decrease) Three Three Months Months Ended Ended 3/31/2022 Amount Percent 3/31/2021 Average WTI Price$ 94.45 $ 36.63 63.4$ 57.82 Adjusted Chargeable Costs$ 69.91 $ 10.67 18.0$ 59.24 Average Production Taxes$ 3.42 $ 1.43 71.9$ 1.99 Average Per Barrel Royalty (paid)$ 21.12 $ 21.12 -$ 0.00 Average net production (mb/d) 73.5 (1.2 ) (1.6 ) 74.7 The average WTI Price for the first quarter of 2022 increased 63.4% compared to the average WTI Price for the first quarter of 2021. The increase in the Consumer Price Index used to calculate the Cost Adjustment Factor, as well as the scheduled increase in Chargeable Costs from$59.24 in the first quarter of 2021 to$69.91 in the first quarter of 2022, resulted in an 18.01% percent increase in Adjusted Chargeable Costs for the three months endedMarch 31, 2022 . Production Taxes increased 71.9% as a result of the increase in the WTI Price for the first quarter of 2022 and an increase in the Consumer Price Index used to calculate the Cost Adjustment Factor. As a result, for the first time since the second quarter of 2015, Production Taxes were not calculated on the basis of the minimum tax underAlaska law and the 2014 Letter Agreement Amendment. See Note 6 of Notes to Financial Statements (Unaudited) in Item 1 above. HNS has informed the Trustee that the minimum tax did not apply due to the taxable value of the oil produced. The Average Per Barrel Royalty paid increased by$21.12 as a result of the significant increase in the Average WTI Price during the three months endedMarch 31, 2022 . The average net production from the 1989 Working Interest for the two reporting periods declined by 1.61%. This decrease was due to the naturally declining production rate from thePrudhoe Bay field. 14
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The following table shows the changes to the Trust's revenues received and distributions paid during the quarter endedJune 30, 2022 , as compared to the same period in 2021 resulting from the factors in the table above, as well as changes in Administrative Expenses. Increase (decrease) Three Three Months Months Ended Ended 6/30/2022 Amount Percent 6/30/2021 (Dollar amounts in thousands) Royalty revenues$ 23,814 $ 23,814 - $ - Cash earnings (loss)$ 23,276 $ 23,276 - $ - Cash distributions$ 23,273 $ 23,273 - $ - Administrative expenses (paid)$ 541 $ 541 - $ - The increase in royalty revenues, cash earnings and cash distributions for the three months endedJune 30, 2022 as compared to the same period in 2021 resulted from the increase in the average WTI Price, offset by an the increase in Adjusted Chargeable Costs and average Production Taxes and a slight decline in average net production that prevailed during the three months endedJune 30, 2022 as compared to same period in 2021. The increase in Administrative Expenses paid during the three months endedJune 30, 2022 , reflects the resumption of the payment of Trust expenses following the prior cessation of royalty revenue. The increase in the Trust corpus is primarily due to the receipt of royalty revenues.
Six Months Ended
Trust royalty revenues received during the first six months of the fiscal year are based on the Royalty Production during the first quarter of the fiscal year and the fourth quarter of the preceding fiscal year. The following table shows the changes between the six months endedMarch 31, 2022 and the six months endedMarch 30, 2021 , in the factors that determined the Per Barrel Royalties used to calculate the Royalty Payment received by the Trust during the six months endedJune 30, 2022 and 2021. Increase (decrease) Six Six Months Months Ended Ended 3/31/2022 Amount Percent 3/31/2021 Average WTI Price$ 85.62 $ 35.46 70.7$ 50.16 Adjusted Chargeable Costs$ 66.21 $ 8.39 14.5
Average Production Taxes$ 3.08 $ 1.40 83.3
Average Per Barrel Royalty (paid)$ 16.33 $ 16.33 -
$ 0
Average net production (mb/d) 72.5 (2.3 ) (3.1 ) 74.8 The average WTI Price for the first six months of 2022 increased 70.7% compared to the average WTI Price for the first six months of 2021. The increase in the Consumer Price Index used to calculate the Cost Adjustment Factor, as well as the scheduled increase in Chargeable Costs from$59.24 in the first quarter of 2021 to$69.91 in the first quarter of 2022, resulted in a 14.5% percent increase in Adjusted Chargeable Costs for the six months endedJune 30, 2022 . Production Taxes increased 83.3% as a result of the increase in the WTI Price for the first quarter of 2022 and an increase in the Consumer Price Index used to calculate the Cost Adjustment Factor. As a result, for the first time since the second quarter of 2015, Production Taxes were not calculated on the basis of the minimum tax underAlaska law and the 2014 Letter Agreement Amendment. See Note 6 of Notes to Financial Statements (Unaudited) in Item 1 above. HNS has informed the Trustee that the minimum tax did not apply due to the taxable value of the oil produced. The Average Per Barrel Royalty paid increased by$16.33 as a result of the significant increase in the Average WTI Price during the six months endedJune 30, 2022 . The average net production from the 1989 Working Interest for the two reporting periods declined by 3.1%. This decrease was due to the naturally declining production rate from thePrudhoe Bay field. 15
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The following table shows the changes to the Trust's revenues received and distributions paid during the six months endedJune 30, 2022 , as compared to the same period in 2021 resulting from the factors in the table above, as well as changes in the Trust's Administrative Expenses. Increase (decrease) Six Six Months Months Ended Ended 6/30/2022 Amount Percent 6/30/2021 (Dollar amounts in thousands) Royalty revenues$ 36,615 $ 36,615 - $ 0 Cash earnings$ 35,714 $ 35,790 -$ (76 ) Cash distributions$ 35,710 $ 35,710 - $ 0 Administrative expenses (paid)$ 905 $ 830 -$ 75 The period-to-period increase in royalty revenues, cash earnings and cash distributions are due to the significantly higher average WTI Prices that prevailed in the fourth quarter of 2021 and the first quarter of 2022, compared to the fourth and first quarters of 2020 and 2021, respectively. The increase in Administrative Expenses paid during the six months endedJune 30, 2022 , reflects the resumption of Royalty Payments and the Trust's ability to pay expenses from the royalty revenues. The decrease in accrued liabilities for Administrative Expenses relates to the Trust's ability to resume making expense payments from royalty revenues, as well as a decrease in professional fees and other Administrative Expenses. The increase in the Trust corpus is primarily due to the receipt of royalty revenues.
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