UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
November 1,
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/A-1
Filed October 5, 2006
File No. 333-136609
Dear Mr. Ulrich:
We have reviewed your response letter and the amended
filing,
and we 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
1. We remind you of prior comments 1 and 2. We may have
additional
comments once you file all omitted exhibits.
2. We note your response to prior comment 4. If you retain the
material that appears on the inside of the front cover page,
include
concise text to make clear which entity or entities own the fields
that are being depicted and to explain any limitations on the
rights
to the fields.
3. You indicate in your response to comment 5 that "the trust
unitholders have the protection of an independent trustee to
enforce
the rights of the Trust against the Company in the event that any
conflicts of interest should arise." On page 75 of the
registration
statement, you state, however, that "[t]he Trustee will not make
business decisions affecting the assets of the trust." Please
discuss
what rights the trustee will be able to enforce against the
company
such that it would be able to avert any conflicts of interest that
may
arise.
Cover Page
Prospectus Summary, page 1
4. Describe in greater detail in the Risk Factors section the
potentially adverse tax consequences to which you allude in the
bullet
point captioned "The trust has not obtained a ruling from the IRS"
at
page 3.
Risk Factors, page 20
5. We refer you to prior comment 11. Please remove or revise, as
appropriate, the following mitigating statements:
* "MV Partners is not able to control and predict whether these
conditions will exist in the future and, if so, what their timing
and
duration will be" on page 22; and
* "... the trust is not aware of any courts that have made that
determination" on page 27.
6. We note your response to prior comment 13. Please disclose
this
information in your business discussion later in the prospectus.
7. We note your response to prior comments 28 and 29. Provide a
new
risk factor or expand an existent risk factor to address:
* the lack of precedent for the tax treatment you anticipate for
the
units; and
* the risk resulting from the net profits interest not being
treated
as a debt instrument.
Also include sufficient detail in the tax consequences section to
make
clear why counsel is unable to render a "will" opinion.
Management of MV Partners, page 35
8. Please provide the information that was the subject of prior
comment 15 for MV Partners, one of the co-registrants.
Discussion and Analysis of Historical Results of the Underlying
Properties, page 51
Hedging and Other Derivative Activities, page 51
9. In response to comment 22 in our letter dated September 13,
2006
you revised the disclosure to state that "Past performance of
[your]
hedges is not necessarily indicative of their future performance."
As
you report a history of hedging losses, expand the disclosure to
explain the specific facts and circumstances as to why you believe
past performance is not indicative of future performance. Please
include similar revisions throughout your document where
applicable.
Planned Development and Workover Programs, page 59
10. Please disclose whether the technologies you describe are
subject
to any licensing or rights agreements. If so, disclose the cost
for
maintaining such licenses or rights and the term of their
duration, if
material.
Financial Statements - MV Partners LLC, page MVF-1
Note A - Summary of Accounting Policies, page MVF-7
2. Interim financial statements, page MVF-7
11. We note your disclosure in which you explain that you have
included ad valorem tax expense for the prior year in your results
of
operations for the six months ended June 30, 2006. Please explain
to
us your basis for not revising your financial statements for the
year
ended December 31, 2005 to reflect this expense in the period in
which
it was incurred. If you believe the effects are not material,
please
submit an analysis in support of your view.
Unaudited Pro Forma Financial Information - MV Partners, LLC, page
MVF-24
Unaudited Pro Forma Statements of Earnings, page MVF-26
12. In your response to comment 42 in our letter dated September
13,
2006 you state that the deferred gain will be amortized to income
based on production occurring over the life of the net profits
interest. It appears that the amortization of the gain will have
a
continuing impact on your operations. Please tell to us why you
have
not included adjustments on the pro forma statements of earnings
to
reflect the portion of the gain that would have been recognized
had
the conveyance of the net profits interest and the initial public
offering transactions occurred as of January 1, 2005.
Notes to the Unaudited Pro Forma Financial Information, page MVF-
27
Note A - Basis of Presentation, page MVF-27
13. We note that MV Partners now intends to sell the 4,000,000
trust
units to its members, VAP-I, LLC and MV Energy, LLC in exchange
for a
cash payment of $8 million and a notes receivable for $72 million.
Further, we note your disclosure in which you state, "In
accordance
with accounting rules for transactions among related parties, the
notes receivable were recorded at the historical carrying value of
the
trust units sold to the members and no gain on sale has been
reflected." It appears you believe the relationship between MV
Partners and these members impacts the accounting treatment for
this
transaction. Please disclose within your document what each
member`s
ownership interest is in MV Partners and when and how each member
acquired its ownership interest.
In addition, please tell us why you have not reflected the note
receivable balance in the amount of $72 million on the pro forma
balance sheet. Presumably the members will begin remitting
quarterly
principal and interest payments to MV Partners in accordance with
the
terms of the notes receivable. Please tell us how MV Partners
will
account for the receipt of these payments if it does not intend to
reflect the outstanding receivable amount on its balance sheet.
Note B - Pro Forma Adjustments, page MVF-28
14. We note that the net profits interest will terminate and the
underlying properties will revert back to MV Partners on the later
to
occur of June 30, 2026, or when 14.4 MMBoe have been produced from
the
underlying properties. Please tell us what consideration, if any,
you
have given to including the return of the net profits interest in
the
calculation of the deferred gain on the sale of net profits
interest.
Within your response, please include any accounting literature you
have relied upon to support your position.
Exhibit 5.1
15. Obtain a new opinion which does not include the limitation
that
the "opinion is for your benefit only and may not be disclosed to
or
relied upon by any other person...."
16. Also obtain an opinion that does not contain the limitations
in
paragraph D relating to income, assets, activities or employees in
the
State of Delaware, or explain to us why those limitations are
appropriate under the circumstances.
Exhibit 10.3
17. We note that you were in default of the credit agreement.
Where
appropriate in the registration statement, discuss the default and
its
consequences.
Engineering Comments
Prospectus Summary, Page 1
Projected Cash Distributions, page 16
18. Your cost line item - Production and property taxes = $2,477
thousand for the year ending December 31, 2007 - does not appear
to
agree with that same item in your consulting engineer`s report -
$998
thousand + $1968 thousand = $2966 thousand. Please reconcile this
difference to us and amend your document if it is appropriate.
This
also applies to similar disclosure on page 43
The Underlying Properties, page 49
Planned Development and Workover Program, page 59
19. You state, "These leases have over 30 undrilled proved
undeveloped
offset locations... MV Partners has scheduled the drilling of
[only]
14 proved undeveloped locations over the next five years." Since
you
have committed to drilling only the 14 PUD locations, the
remaining
locations for which you have made no commitment cannot be
characterized as "proved undeveloped" even though they may comply
with
other criteria for PUD reserves. Please amend your discussion so
that
the unscheduled locations are not described as proved undeveloped.
20. We note that your consulting engineer`s report does not
project
any COPAS costs to proved non-producing and proved undeveloped
properties. Please explain this to us and amend your proved
reserve
and associated net income disclosures if it is appropriate.
21. Your consulting engineer`s report - Table I - PUD -shows a
maximum
proved undeveloped gross well count of 135, but there are only 64
wells listed in Table II - PUD. Please reconcile this to us.
* * * * *
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
November 1, 2006
Page 7