Financial Highlights
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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 $11.4 billion over the ensuing 85 years, as depicted in Figure A. Since 1923, a cumulative $8,268 million, or approximately 56.0% 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 $4,867 million to the PUF investment portfolio.
As depicted in Figure B, even though fiscal year 2008 proved to be a tough year from a net investment return perspective, the PUF has still shown tremendous growth over the past five years. The PUF's net assets have grown from $7,245 million to $11,359 million, an increase of 56.8% after distributions over the five year period.
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The PUF benefited from the sixth consecutive year of substantial increases in PUF Lands' mineral contributions. Mineral contributions reached $458 million 2008, the highest amount in the history of the PUF for the second year in a row and a 67.8% increase over the prior year. This amount included a one-time damage payment transfer of approximately $23 million. Mineral contributions provide a significant and valuable inflow of dollars, leading to a stronger investment portfolio.
The 67.8% increase in mineral income was due to several factors, including $220 million of royalties on the production of crude oil amounting to 48% of the total mineral contributions for 2008, an increase of 93.7% over 2007. Oil prices skyrocketed in 2008, with average volume prices realized on oil production increasing by $40.13/barrel to $102.81/barrel. Production volume also increased by approximately 12.2% for the year.
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The University of Texas at San Antonio
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Royalties on the production of natural gas accounted for another 37% of PUF Lands mineral income. Gas prices increased in fiscal year 2008, as average gas prices realized on royalty gas production increased by 17.0% to 7.76/mcf. Gas royalties increased by 75.5%, the result of the increase in price and a net production increase of 40%.
Bonuses paid on the sales of oil and gas leases amounted to the 7% of the total mineral contributions for 2008, and totaled $33.0 million in 2008, a decrease of 39% over the previous year. Other rents and royalties and the one-time damage payment transfer accounted for 8% of the total mineral income.
Even with the extremely valuable PUF Lands and the continual inflow of mineral contributions, $2.1 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 1980, 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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