UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
September
13,
2006
via facsimile and U.S. mail
Mr. Mike J. Ulrich
JPMorgan Chase Bank N.A., Trustee
Institutional Trust Services
221 West Sixth Street, 1st Floor
Austin, Texas 78701
Re: MV Oil Trust
Registration Statement on Form S-1
Filed August 14, 2006
File No. 333-136609
Dear Mr. Ulrich:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form S-1
General
1. To eliminate the need for us to issue repetitive comments,
please
make appropriate corresponding changes to all disclosure to which
a
comment relates. If parallel information appears at more than one
place in the document, provide in your response letter page
references
to all responsive disclosure.
2. Please file all omitted exhibits, including the opinions of
counsel
regarding trust and tax matters. Also ensure that you file all
material contracts, including the Operating Agreement of MV
Partners
referenced on page 29. Note that you will need to allow time for
our
review once you file all these documents.
3. In the amended registration statement, fill in all blanks other
than the information that Rule 430A permits you to omit. Also
include updated disclosure, including the financial information
for
the quarter ended June 30, 2006, and advise us regarding the
status of
your application to list on The New York Stock Exchange. If the
information you provide may change prior to effectiveness of the
Form
S-1, include brackets to indicate this. We also encourage you to
include your internet address in your filing. See Item 101(e) of
Regulation S-K.
4. Provide for our review and comment any graphics or other
artwork
you propose to include in the prospectus.
5. Revise to give effect to Securities Act Release No. 33-6900 and
Securities Act Industry Guide 5. Among other things, you fail to
include the cover page disclosure mandated by Section II.A.3.a of
the
release, and you need to include the undertakings required by Item
20
to Industry Guide 5. See generally Sections II.A.3.f, II.B.2, and
II.B.3.b of Securities Act Release No. 33-6900. We may have
additional
comments.
6. In connection with the quarterly distribution the trust intends
to
distribute to unitholders, as well as the reference at page 7 to
the
expectation of "attractive returns on capital deployed," we refer
you
to the Commission`s policy on projections in Item 10(b) of
Regulation
S-K. With regard to all subjective statements regarding future
performance, define in context assertions like "attractive
returns."
We may have additional comments.
Cover Page
7. Please disclose the components of the structuring fees to be
paid
to Raymond James & Associates, Inc.
Prospectus Summary, page 1
1. Eliminate repetitive disclosure throughout your prospectus.
The
summary in particular should focus on only the most material
aspects
of your offering. You mention at least three times by page 3 what
comprises your "underlying properties," for example.
2. You refer at page 1 to "numerous additional development
opportunities," as well as the million-dollar cap on a reserve for
future capital expenditures. At page 5, you explain further how
capital expenditures may be made, and the expected amounts.
Please
revise to clarify in each case how your restrictions and the
trust`s
purpose limit development and further expenditures. Also tie
together
these related points so that the reader can obtain a clearer view
of
how your business will balance cash distributions against the
desire
to offset or mitigate accelerated production declines.
Historical Results from Underlying Properties, page 10
8. On page 11 you provide a table that presents the excess
revenues
over direct operating expenses for the underlying properties,
excluding the effects of hedges and other derivative activity.
You
explain that you believe the presentation of this measure is
useful
because it helps investors understand the operating performance of
the
underlying properties unaffected by your hedging arrangements. As
you
have hedged approximately 82% to 88% of expected production for
the
years 2006, 2007, and 2008; and 56% to 58% of expected production
for
2009 and 2010, please tell us why you believe it is useful to
present
a measure that excludes the effects of your hedges and other
derivative activity. In addition, please be advised that this
disclosure is considered a non-GAAP measure. As such, you must
provide all disclosures required by Item 10(e) of Regulation S-K.
Risk Factors, page 18
9. Eliminate language that mitigates the risk you present.
Examples
include the reference to "large credit-worthy institutions" at
page 26
and statements that begin with "although" on pages 18 and 20.
Also
state the risk directly and plainly, eliminating statements such
as
"[n]o assurance" on pages 24 and 25.
10. Revise generally to ensure that each caption clearly
identifies
and each risk factor clearly discusses the risks associated with
the
facts you describe. Many of your risk factors merely state facts,
including the last risk factor on page 19.
11. We note that two customers account for more than 10% of the
revenues generated from the underlying properties. If material,
please discuss the risk associated with the loss of any
substantial
customers.
3. If you are aware of any jurisdictions that have not recognized
the
limited liability you cite under "Courts outside of Delaware" at
page
24, expand the risk factor to identify them.
Management of MV Partners, page 32
12. Please provide the compensation information required by Item
402
of Regulation S-K for those individuals comprising MV Partners`
executive management team.
Projected Cash Distributions, page 38
13. Include a detailed tabular presentation, based upon the
historical
information you have available, to show the estimated cash
available
to pay distributions over each of the ensuing quarters during
which
you expect to pay. With a view toward disclosure, also provide
the
staff with a table that reflects what payments would have been for
the
most recent four fiscal quarters, if this information is available
or
can be obtained. We may have additional comments.
4. It appears inappropriate to suggest that the assumptions "are
unlikely to be accurate." Similarly, it is unclear which
information
is "not fact." Revise to clarify.
Significant Assumptions Used to Prepare the Projected Cash
Distributions, page 42
14. We note that the projected cash distribution per trust unit
for
the twelve months ending December 31, 2007 is $3.02, as compared
to
$1.09 for the pro forma year ended December 31, 2005 (per the
unaudited pro forma Statements of Distributable Income on page F-
14).
Please expand your disclosure to explain the factors resulting in
the
significant increase in your projected cash distribution per trust
unit.
Production Estimates, page 42
15. You explain that production from the underlying properties for
2007 is estimated to be approximately 1,134 MBOE (assuming 6 Mcf =
1
BOE). Revise your discussion to explain why this production
estimate
is significantly greater than the actual production for 2005 of
1,073
BOE, and the annualized production for 2006 of 1,052 BOE (2,884
BOE
per day * 365 days). As part of your expanded disclosure, please
address why you believe production will increase during 2007,
considering you also expect a 3.5% annual average decline in
production over the next 20 years (as explained on page 45).
Costs, page 43
16. Within your discussion you provide the amount of expenses per
trust unit. Please tell us why you have provided the amount of
expenses on a per trust unit basis, as compared to a per barrel
basis
as presented in other portions of the document. For consistency
and
comparability purposes, please provide a consistent measure
throughout
the document. In addition, to the extent your estimates of these
costs vary from the historical results, please disclose the
underlying
reasons for the differences.
The Underlying Properties, page 44
17. Please provide the liquidity and capital resources information
required by Item 303 of Regulation S-K. Also ensure that you
discuss
any trends and uncertainties that might have a material favorable
or
unfavorable impact on your revenues or income.
Discussion and Analysis of Historical Results of the Underlying
Properties, page 46
Hedging and Other Derivative Activities, page 46
18. You explain that a majority of the increase in hedging and
other
derivative activities expense is a result of the ineffectiveness
of
hedges and other derivatives currently in place. Please expand
your
disclosure to explain the underlying reasons hedge ineffectiveness
increased, and the likelihood that past performance is indicative
of
future performance (e.g. do you expect continued hedge
ineffectiveness
and why). Please include similar revisions throughout your
document
in areas where results of the period are compared to the prior
period.
Competition and Markets, page 59
19. If practicable, please identify your competitors and your
competitive position among such competitors.
20. Please identify any customers that account for more than 10%
of
the revenues generated from the underlying properties. In this
regard, we note your disclosure on page MV-6. Also file as
exhibits
any material contracts with such customers.
Environmental Matters and Regulation, page 59
5. Rather than summarizing "some" laws and regulations, describe
all
those that are material to an understanding of your business.
Description of the Trust Units, page 71
6. Expand the tabular disclosure to describe in greater detail the
trustee`s fiduciary duties.
Federal Income Tax Consequences, page 76
21. Explain why counsel has rendered an opinion that only applies
to
trust unitholders that purchase "upon the initial issuance at the
initial issue price."
22. Advise us whether you or counsel are aware of any
circumstances in
which similar securities were accorded the treatment you propose
by
the IRS. We may have additional comments.
23. Explain in greater detail why the net profits interests
"should be
treated" in the manner you describe under "Classification of the
Net
Profits Interests." Also explain why counsel is not rendering a
"will" opinion for that purpose. We may have additional comments.
24. Disclose in the prospectus the "projected payment schedule" to
which you refer at page 79.
25. Please revise the last paragraph under this section. The
statement that the "discussion of U.S. Federal Income Tax
considerations is for general information only" inappropriately
suggests that readers may not be able to rely on the information
and
the opinions set forth in this section.
State Tax Considerations, page 83
7. The disclosure you include is incomplete. Provide a more
useful
description of the applicable laws regarding nonresident
unitholders
and potential tax withholding, if material. If you believe that
this
information would not be material to investors, explain why. We
may
have additional comments.
Underwriting
Lock-up Agreement, page 86
26. Disclose whether Raymond James & Associates, Inc. has any
present
intent or any understandings, tacit or explicit, to release the
lock-
ups early.
Financial Statements, page F-1
General
27. Please update your historical and pro forma financial
statements
to comply with the guidance in Rule 3-12 and Rule 11-02(c) of
Regulation S-X.
MV Oil Trust Unaudited Pro Forma Financial Information, page F-12
Unaudited Pro Forma Statement of Assets and Trust Corpus, page F-
13
28. It appears that you intend to value the investment in the Net
Profits Interests transferred to the Trust at the proposed market
price (fair value) of the Trust units issued to MV Partners. As
indicated at SAB Topic 5.G, transfers of nonmonetary assets to a
company by its promoters or shareholders in exchange for stock
prior
to or at the time of the company`s initial public offering are
generally recorded at the transferors` historical cost basis.
Please
tell us why you have not valued the investment at MV Partner`s
historical cost. Within your response, please include any
applicable
accounting literature you relied upon in determining the value of
the
investment.
Unaudited Pro Forma Statements of Distributable Income, page F-14
29. We note that you have adjusted the statements of distributable
income for the Trust`s general and administrative expenses. In
footnote (b) of the pro forma adjustments, you explain that the
Trust`s general and administrative expenses are estimated at
$600,000
annually, excluding the contractual administrative fee payable to
MV
Partners of $60,000. Adjustments within the pro forma table
should be
limited to events that are directly attributable to the specific
transaction, factually supportable and expected to have a
continuing
impact. Please tell us if the adjustments you have made for
general
and administrative expenses meet these requirements. If not, such
adjustments should be identified in narrative disclosure in the
pro
forma area, rather than adjusted in the tabular presentation.
Refer
to Article 11-02(b) of Regulation S-X for further guidance.
Information about MV Partners, LLC, page MV-1
Management`s Discussion and Analysis of Financial Condition and
Results of Operations of MV Partners, page MV-9
Liquidity and Capital Resources, page MV-15
Financing Activities, page MV-17
30. You explain that your bank credit facility requires you to
maintain a current ratio of not less than 1.0 to 1.0, and that you
are
in compliance with all of the covenants of the facility. However,
under the generally accepted definition of the current ratio
(current
assets/current liabilities), your ratio as of December 31, 2005 is
approximately 0.51 to 1.0 ($12.6 million/$24.8 million). Please
provide a brief definition of the current ratio as defined in your
revolving credit facility, to provide the reader the information
necessary to recalculate the ratio.
Contractual Obligations, page MV-18
31. We note footnote (1) to the table of contractual obligations
in
which you state "This table does not include any liability
associated
with derivatives." Please expand your disclosure to explain why
you
believe excluding the amounts related to derivatives is
appropriate.
Financial Statements - MV Partners LLC, page MVF-1
Note B - Oil and Gas Properties, page MVF-11
32. We note that you identify asset retirement costs as a separate
line item in your table of capitalized costs and costs incurred
for
each year, which is contrary to the guidance in paragraph 11 of
SFAS
143, requiring adjustment to the asset to which an asset
retirement
liability relates. Accordingly, we believe that you should
reclassify
the asset retirement costs to the related line items to which the
corresponding asset retirement obligation relates. The amount of
asset retirement costs included may be described in a footnote to
the
schedules, if so desired. You may refer to our February 2004
industry
letter for guidance on related topics, accessible on our website
at
the following address:
http://www.sec.gov/divisions/corpfin/guidance/oilgasletter.htm
Note C - Note Payable, page MVF-12
Aggregate Commitment Amount, page MVF-13
33. You state that "The Partnership believes it is in compliance
with
the required debt covenants at December 31, 2005 and March 31,
2006."
Please revise your disclosure to state definitively whether you
have
or have not complied with all required debt covenants.
Note D - Financial Instruments, page MVF-13
34. Please expand your disclosure to include the estimated amount
of
unrealized gains and losses expected to be reclassified into
earnings
in the next 12 months as required by paragraph 45 of SFAS 133.
Unaudited Pro Forma Financial Information - MV Partners, LLC, page
MVF-23
Unaudited Pro Forma Balance Sheet, page MVF-24
35. We note from the balance sheet and corresponding footnote (e)
to
the pro forma adjustments that you present a deferred gain on sale
of
the net profits interest in the amount of $121.4 million. Please
tell
us why you have deferred the recognition of the gain, and why you
have
presented it as a long term liability. Within your response
please
include any applicable accounting literature you relied upon in
reaching your conclusions.
Signatures, page II-5
36. Please revise to eliminate your reference to Rule 462(b) of
the
Securities Act, which appears to be incorrect.
Engineering Comments
General
37. Some of these comments request that you submit supplemental
information. If you wish that we return these materials to you
upon
completion of our review, you must make this request at the time
that
you furnish the materials. See Rule 418(b) under Regulation C.
Prospectus Summary, Page 3
Summary Proved Reserves, page 8
38. Please furnish to us the reserve report that served as the
basis
for the proved reserves disclosed here. You should include:
a) One-line recaps for each property sorted by field and by
present
worth within each proved reserve category including the estimated
date
of first production for your proved undeveloped properties;
b) Total company summary income forecast schedules for each proved
reserve category with proved developed segregated into producing
and
non-producing properties;
c) Individual income forecasts for each of the three largest
properties (net equivalent reserve basis) in the proved developed
and
in the proved undeveloped categories as well as the AFE for each
of
the three PUD projects;
d) Engineering exhibits (e.g. maps, rate/time plots, volumetric
calculations) for each of these six largest properties. Please
include normal operational plots such as oil cut vs. cumulative
production and injection history/estimated fill up for any
secondary
recovery units in these largest properties. Include analogies and
other support for your assumed drainage areas and recovery
efficiencies.
Please direct these engineering items to:
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-7010
Attn: Ronald M. Winfrey
* * * * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Act of 1933
and
that they have provided all information investors require for an
informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Marc Wojciechowski at (202) 551-3759 or
Jennifer
Gallagher at (202) 551-3706 if you have questions regarding
comments
on the financial statements and related matters. Direct your
questions relating to the engineering comments to Ronald Winfrey,
Petroleum Engineer, at (202) 551- 3704. Please contact Carmen
Moncada-Terry at (202) 551-3687 or, in her absence, Timothy
Levenberg,
Special Counsel, at (202) 551-3707 with any other questions.
Sincerely,
H. Roger Schwall
Assistant Director
cc: M. Ulrich
M. Wojciechowski
J. Gallagher
T. Levenberg
C. Moncada-Terry
Mr. Mike J. Ulrich
MV Oil Trust
September 13, 2006
Page 11