VOC Energy Trust (NYSE: VOC) is an oil and natural gas royalty trust that holds a term net profits interest in oil and gas properties operated by VOC Brazos Energy Partners, L.P. in Kansas and Texas. The trust generates income by receiving a contractual share of net profits from those underlying properties, then distributing that income to unitholders. Established in Delaware and structured under an Amended and Restated Trust Agreement dated May 10, 2011, the trust is administered by The Bank of New York Mellon Trust Company, N.A. as trustee, with Wilmington Trust Company serving as Delaware trustee. Distributable income was $7,990,000 in FY2015, down sharply from $31,450,000 in FY2014, reflecting oil price declines. Distributions per trust unit fell from $1.85 in FY2014 to $0.47 in FY2015. Proved reserves stood at 5,877 MBoe as of December 31, 2015, spanning 174 fields in Kansas and additional properties in Texas.

Revenue model

The trust earns net profits income derived from a term net profits interest conveyed from VOC Brazos Energy Partners, L.P. and VOC Kansas Energy Partners, LLC. Net profits income was $8,627,256 in FY2015 and $32,284,622 in FY2014. All distributable income is passed through to unitholders on a per-unit basis.

Products and services

Term net profits interest in oil and natural gas producing properties. Underlying production includes crude oil (primary) and natural gas. The trust holds no operational role and conducts no drilling or production activities directly.

Customers and end markets

Unitholders of beneficial interest listed on the New York Stock Exchange are the recipients of trust distributions. End-market demand is driven by crude oil and natural gas commodity prices. The trust's income is directly tied to oil and gas production volumes and realized commodity prices from the underlying Kansas and Texas properties.

Value-chain role

Passive royalty trust. VOC Energy Trust sits above the operator in the value chain, receiving a contractual net profits interest from VOC Brazos Energy Partners, L.P., which conducts all field operations. The trust itself does not operate wells, employ field personnel, or incur development capital expenditures.

Geographic exposure

Kansas (174 fields, including Fairport, Codell, Chase-Silica, Marcotte, and Bindley formations) and Texas, as disclosed in the 10-K filed March 15, 2016 for fiscal year ended December 31, 2015. Kansas represented the majority of proved reserves as of December 31, 2015.

Source: SEC 10-K, filed 2016-03-15

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