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Financial Highlights
The investment history of the PUF originated in 1923 with the discovery of oil and gas from the legendary Santa Rita No. 1 well. In 1926, the Texas Supreme Court ruled that the proceeds from the sale of mineral production from PUF Lands should be invested as endowment corpus. These proceeds provided the foundation for the PUF Investments to grow to $11.7 billion over the ensuing 84 years, as depicted in Figure A.
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Since 1923, a cumulative $7,819 million, or approximately 51.6% of cumulative investment return generated on PUF Investments, has been distributed to the AUF in support of the UT System and TAMU System. Over this same time period, the mineral income contributed $4,409 million to the PUF investment portfolio.
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The PUF continues to grow as depicted in Figure B. The PUF's net assets have grown from $6,738 million to $11,743 million, an increase of 74.3% after distributions over the past five years. Fiscal year 2007 resulted in the fifth consecutive year of strong investment returns.
In addition to strong investment returns during fiscal 2007, the PUF also benefited from the fifth consecutive year of substantial increases in PUF Lands mineral contributions. Mineral contributions reached $273 million in 2007, the highest amount in the history of the PUF and a 26.8% increase over the prior year. Mineral contributions provide a significant and valuable inflow of dollars, leading to a stronger investment portfolio.
The 26.8% increase in mineral income was due to several factors, including $113 million of royalties on the production of crude oil amounting to 41% of the total mineral contributions for 2007, an increase of 7.2% over 2006. Oil prices continued their upward spiral in 2007, with average volume prices realized on oil production increasing by $1.72/barrel to $62.68/barrel. Production volume also increased by approximately 2.3% for the year.
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The University of Texas at Dallas
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Royalties on the production of natural gas accounted for another 36% of PUF Lands mineral income. Gas prices decreased in fiscal year 2007, as average gas prices realized on royalty gas production decreased by 1.8% to 6.63/mcf. Despite the decrease in wellhead gas prices, gas royalties still increased by 37.9%, the result of a net production increase of 23%.
Bonuses paid on the sales of oil and gas leases also contributed to the increase in mineral income over last year, amounting to 20% of the total mineral contributions for 2007. Bonuses amounted to $54 million in 2007, an increase of 67% over the previous year.
Even with the extremely valuable PUF Lands and the continual inflow of mineral contributions, $1.8 billion credited over the past 15 years alone, preservation of PUF endowment purchasing power is still critically dependent on investment returns, as evidenced by examining the components of growth in the value of PUF Investments since 1979, depicted in Figure C. It is The University of Texas Investment Management Company's (UTIMCO) responsibility to invest the PUF Land contributions and preserve the PUF's purchasing power.
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