United States Oil Fund, LP - Quarter Report: 2006 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 2006.
|
¨
|
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from__________to_________.
|
Commission
file number: 001-32824
United
States Oil Fund, LP
(Exact
name of registrant as specified in its charter)
Delaware
|
|
20-2830691
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
1320
Harbor Bay Parkway, Suite 145
Alameda,
California 94502
(Address
of principal executive offices)
(510)
522-3336
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x
Yes ¨
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one.)
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.):
¨
Yes x
No
UNITED
STATES OIL FUND, LP
Table
of Contents
FINANCIAL
INFORMATION
|
||
Part
I. FINANCIAL INFORMATION
|
Page
|
|
Part
II. OTHER INFORMATION
|
||
Condensed
Statements of Financial Condition
|
|||||||
At
September 30, 2006 and December 31, 2005
(unaudited)
|
|||||||
|
|||||||
|
|||||||
September
30, 2006
|
December
31, 2005
|
||||||
Assets
|
|||||||
Investments,
at cost
|
$
|
160,000,000
|
$
|
-
|
|||
Cash
and cash equivalents
|
221,442,330
|
1,000
|
|||||
Deposits
with ABN AMRO as collateral for futures contracts
|
63,157,281
|
-
|
|||||
Unrealized
depreciation on futures contracts
|
(24,111,280
|
)
|
-
|
||||
Receivable
for units sold
|
22,768,572
|
-
|
|||||
Interest
receivable
|
555,200
|
-
|
|||||
Total
assets
|
$
|
443,812,103
|
$
|
1,000
|
|||
Liabilities
and partnership capital
|
|||||||
Payable
for units redeemed
|
$
|
44,254,984
|
$
|
-
|
|||
Investment
management fee
|
171,244
|
-
|
|||||
Total
liabilities
|
44,426,228
|
-
|
|||||
Partnership
Capital
|
|||||||
General
partner
|
-
|
20
|
|||||
Limited
partners
|
399,385,875
|
980
|
|||||
Total
partnership capital
|
399,385,875
|
1,000
|
|||||
Total
liabilities and partnership capital
|
$
|
443,812,103
|
$
|
1,000
|
|||
Limited
partnership units outstanding
|
7,000,000
|
||||||
Net
asset value per unit
|
$
|
57.06
|
|||||
Market
value per unit
|
$
|
56.81
|
|||||
See
accompanying notes to condensed financial statements.
|
1
United
States Oil Fund, LP
|
||||||||||
Condensed
Schedule of Investments
|
||||||||||
As
of September 30, 2006 (unaudited)
|
||||||||||
Short-Term
Investments
|
||||||||||
|
Face
Value
|
Cost
|
Market
Value
|
|||||||
United
States - Money Market Funds
|
||||||||||
AIM
STIT- Government & Agency Portfolio
|
$
|
80,000,000
|
$
|
80,000,000
|
$
|
80,000,000
|
||||
AIM
STIT- Liquid Assets Portfolio
|
80,000,000
|
80,000,000
|
80,000,000
|
|||||||
$
|
160,000,000
|
$
|
160,000,000
|
$
|
160,000,000
|
Open
Futures Contracts
|
|||||||
Number
of
|
Unrealized
|
||||||
|
Contracts
|
Depreciation
|
|||||
United
States
|
|||||||
Crude
Oil Future contracts, due November 2006
|
6,348
|
$
|
(24,111,280
|
)
|
|||
See
accompanying notes to condensed financial statements.
|
2
Condensed
Statements of Operations,
|
|||||||
For
the three months ended September 30, 2006 and the period
from
|
|||||||
April
10, 2006 (commencement of operations) to September 30, 2006
(unaudited)
|
|||||||
Three
Months
|
April
10, 2006
|
||||||
Ended
|
to
|
||||||
September
30, 2006
|
September
30, 2006
|
||||||
Net
Realized and Unrealized Gain (Loss) from
Investments
|
|||||||
Net
realized loss on futures transactions
|
$
|
(54,453,070
|
)
|
$
|
(65,861,220
|
)
|
|
Net
unrealized depreciation on futures transactions
|
(31,568,760
|
)
|
(24,111,280
|
)
|
|||
Net
realized and unrealized loss from futures transactions
|
(86,021,830
|
)
|
(89,972,500
|
)
|
|||
Investment
Income
|
|||||||
Interest
income
|
4,235,056
|
6,118,863
|
|||||
Other
income
|
40,000
|
81,000
|
|||||
Total
income
|
4,275,056
|
6,199,863
|
|||||
Expenses
|
|||||||
Management
fee
|
452,264
|
671,287
|
|||||
Commission
expense
|
129,645
|
199,945
|
|||||
Total
expenses
|
581,909
|
871,232
|
|||||
Net
investment income
|
3,693,147
|
5,328,631
|
|||||
Net
loss
|
$
|
(82,328,683
|
)
|
$
|
(84,643,869
|
)
|
|
Net
loss per limited partnership unit
|
$
|
(12.76
|
)
|
$
|
(10.33
|
)
|
|
Net
loss per weighted average limited partnership
unit
|
$
|
(14.80
|
)
|
$
|
(19.59
|
)
|
|
Weighted
average limited partnership units outstanding
|
5,563,043
|
4,321,264
|
|||||
See
accompanying notes to condensed financial statements.
|
3
Condensed
Statement of Changes in Partnership Capital,
|
|||||||||||||
Period
from April 10, 2006 (commencement of
operations)
|
|||||||||||||
to
September 30, 2006 (unaudited)
|
|||||||||||||
Limited
|
|||||||||||||
General
Partner
|
Limited
Partners
|
Partnership
Units
|
Total
|
||||||||||
Balances,
at December 31, 2005
|
$
|
20
|
$
|
980
|
-
|
$
|
1,000
|
||||||
Capital
contributions
|
-
|
990,332,350
|
14,800,000
|
990,332,350
|
|||||||||
Capital
withdrawals
|
(20
|
)
|
(506,303,586
|
)
|
(7,800,000
|
)
|
(506,303,606
|
)
|
|||||
Net
loss for the period
|
-
|
(84,643,869
|
)
|
-
|
(84,643,869
|
)
|
|||||||
Balances,
at September 30, 2006
|
$
|
-
|
$
|
399,385,875
|
7,000,000
|
$
|
399,385,875
|
||||||
See
accompanying notes to condensed financial statements.
|
4
Condensed
Statement of Cash Flows,
|
||||
Period
from April 10, 2006 (commencement of
operations)
|
||||
to
September 30, 2006 (unaudited)
|
||||
Cash
Flows from Operating Activities
|
||||
Net
loss
|
$
|
(84,643,869
|
)
|
|
Unrealized
depreciation on futures contracts
|
24,111,280
|
|||
Adjustments
to reconcile net loss to net cash
|
||||
used
in operating activities
|
||||
Changes
in:
|
||||
Purchase
of investment securities
|
(160,000,000
|
)
|
||
Deposits
with broker
|
(63,157,281
|
)
|
||
Interest
receivable and other assets
|
(555,200
|
)
|
||
Investment
advisory fee payable and other liabilities
|
171,244
|
|||
Net
cash used in operating activities
|
(284,073,826
|
)
|
||
Cash
Flows from Financing Activities
|
||||
Capital
contributions by limited partners
|
967,563,778
|
|||
Capital
withdrawals
|
(462,048,622
|
)
|
||
Net
cash provided by financing activities
|
505,515,156
|
|||
Net
change in cash and cash equivalents
|
221,441,330
|
|||
Cash,
beginning of period
|
1,000
|
|||
Cash,
end of period
|
$
|
221,442,330
|
||
See
accompanying notes to condensed financial
statements.
|
5
United
States Oil Fund, LP
(formerly
New York Oil ETF, LP)
Notes
to Condensed Financial Statements
September
30, 2006 (unaudited)
NOTE
1 - ORGANIZATION AND BUSINESS
United
States Oil Fund, LP (formerly New York Oil ETF, LP) (the “Fund”), was organized
as a limited partnership under the laws of the state of Delaware on May 12,
2005
and changed its name on September 30, 2005. The Fund is a commodity pool
that
issues units that may be purchased and sold on the American Stock Exchange.
The
Fund will continue in perpetuity, unless terminated sooner upon the occurrence
of one or more events as described in its First Amended and Restated Limited
Partnership Agreement (the “Limited Partnership Agreement”). The investment
objective of the Fund is for its net asset value to reflect the performance
of
the price of light, sweet crude oil, less the Fund’s expenses. The Fund will
accomplish its objectives through investments in futures contracts for light,
sweet crude oil, other types of crude oil, heating oil, gasoline, natural
gas
and other petroleum-based fuels that are traded on the New York Mercantile
Exchange and other U.S. and foreign exchanges (“Oil Futures Contracts”) and
other oil interests such as cash-settled options on Oil Futures Contracts,
forward contracts for oil, and over-the-counter transactions that are based
on
the price of oil. Victoria Bay Asset Management, LLC is the general partner
of
the Fund (the “General Partner”) and is also responsible for the management of
the Fund. The
Fund
commenced operations on April 10, 2006.
Through
April 10, 2006, all of USOF’s and the General Partner’s expenses were funded by
their affiliates. Since April 10, 2006, these expenses have been borne by
USOF
and the General Partner except that their affiliate provided the funds for
USOF’s payment of a portion of the fees due to the SEC and the NASD in
connection with USOF’s registration of additional units during October. Neither
USOF nor the General Partner has any obligation or intention to refund such
payments by their affiliates. The General Partner is a member of the
National Futures Association (“NFA”) and is a commodity pool operator effective
December 1, 2005. The
Fund
has a fiscal year ending on December 31.
The
accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and
Exchange Commission and therefore does not include all information and footnote
disclosure required under accounting principles generally accepted in the
United
States of America. The financial information included herein is unaudited,
however, such information reflects all adjustments which are, in the opinion
of
management, necessary for the fair presentation of the financial statements
for
the interim period.
The
Fund
issues limited partnership interests (“Units”) to authorized purchasers by
offering creation baskets consisting of 100,000 Units (“Creation Baskets”)
through a marketing agent. The purchase price for a Creation Basket is based
upon the net asset value of a Fund Unit. In addition, authorized purchasers
pay
the Fund a $1,000 fee for the creation of each Creation Basket. The initial
offering price of the initial creation basket was based on the closing price
of
the near month oil futures contracts as traded and reported on the New York
Mercantile Exchange on the last business day prior to the effective date.
Additionally, subsequent to the sale of the initial Creation Basket, Units
can
be purchased or sold on a nationally recognized securities exchange in smaller
increments. Units purchased or sold on a nationally recognized securities
exchange are not made at the net asset value of the Fund but rather at market
prices quoted on the stock exchange.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Recognition
Commodity
futures contracts, forward contracts, physical commodities, and related options
are recorded on the trade date. All such transactions are recorded on the
identified cost basis and marked to market daily. Unrealized gains or losses
on
open contracts are reflected in the statement of financial condition and
the
difference between original contract amount and
6
market
value (as determined by exchange settlement prices for futures contracts
and
related options and cash dealer prices at a predetermined time for forward
contracts, physical commodities, and their related options) as of the last
business day of the year or as of the last date of the financial statements.
Changes in the unrealized gains or losses between periods are reflected in
the
statement of operations. The Fund earns interest on its assets on deposit
at the
broker at the 30-day Treasury bill rate less fifty basis points for deposits
denominated in U.S. dollars.
Brokerage
Commissions
Brokerage
commissions on all open commodity futures contracts are accrued on a full-turn
basis.
General
Partner Management Fee
Under
the
Limited Partnership Agreement, the General Partner is responsible for investing
the assets of the Fund in accordance with the objectives and policies of
the
Fund. In addition, the General Partner has arranged for one or more third
parties to provide administrative, custody, accounting, transfer agency and
other necessary services to the Fund. For these services, the Fund is
contractually obligated to pay the General Partner a fee, which is paid monthly,
based on average daily net assets that are equal to .50% per annum on average
net assets of $1,000,000,000 or less and .20% per annum of average daily
net
assets that are greater than $1,000,000,000. The Fund will pay for all brokerage
fees, taxes and other expenses.
Income
Taxes
The
Fund
is not subject to federal income taxes; each partner reports his/her allocable
share of income, gain, loss deductions or credits on his/her own income tax
return.
Redemptions
Authorized
persons may redeem Units from the Fund only in blocks of 100,000 Units called
“Redemption Baskets”. The amount of the redemption proceeds for a Redemption
Basket will be equal to the net asset value of the Fund Units in the Redemption
Basket.
Partnership
Capital and Allocation of Partnership Income and Losses
Profit
or
loss shall be allocated among the partners of the Fund in proportion to the
number of Units each partner holds as of the close of each month. The General
Partner may revise, alter or otherwise modify this method of allocation as
described in the Limited Partnership Agreement.
Calculation
of Net Asset Value
The
Fund
calculates its net asset value per Unit on each trading day by taking the
current market value of its total assets, subtracting any liabilities and
dividing the amount by the total number of Units issued and outstanding
on that
day. The Fund uses the New York Mercantile Exchange closing price on that
day to
value the futures contracts purchased
on the exchange and held
by
the Fund. The September 30, 2006 NAV as reported in these financial statements
reflects a $0.02 per Unit reduction from the NAV as previously reported
on Form
8-K filed
October 24, 2006 due
to the
correction of an overaccrual of interest income during the third quarter.
The
overaccrual of interest income has been corrected on the books and records
of
the Fund.
Loss
per Limited Partnership Unit
Net
loss
per limited partnership Unit is the difference between the net asset value
per
Unit at the beginning and end of each period. The weighted average number
of
limited partnership Units outstanding was computed for purposes of disclosing
net loss per weighted average limited partnership Unit. The weighted average
limited partnership Units are equal to the number of Units outstanding at
period
end, adjusted proportionately for Units added or redeemed based on their
respective time outstanding during such period. There were no outstanding
Units
held by the General Partner at September 30, 2006.
7
Cash
Equivalents
As
of
September 30, 2006, cash and cash equivalents included money market portfolios
and overnight time deposits with original maturity dates of three months
or
less.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Fund's
management to make estimates and assumptions that affect the reported amount
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statement, and the reported amounts of the revenue
and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE
3 - CONTRACTS AND AGREEMENTS
The
Fund
is party to a marketing agent agreement dated March 13, 2006 with ALPS
Distributors Inc. (“ALPS”), a Colorado corporation, whereby ALPS provides
certain marketing services for the Fund as outlined in the agreement. The
fees
of the marketing agent, which are borne by the General Partner, include a
marketing fee of $425,000 per annum plus the following incentive fee: zero
basis
points on Fund assets from $0 - $500 million; 4 basis points on Fund assets
from
$500 million - $4 billion; and 3 basis points on Fund assets in excess of
$4
billion.
The
above
fees do not include the following expenses, which are also borne by the General
Partner: the cost of placing advertisements in various periodicals; web
construction and development; or the printing and production of various
marketing materials.
The
Fund
is also party to a custodian agreement dated March 13, 2006, with Brown Brothers
Harriman & Co. (“Brown Brothers”), whereby Brown Brothers holds investments
on behalf of the Fund. The General Partner of the Fund pays the fees of the
custodian, which shall be agreed to from time to time between the parties.
In
addition, the Fund is party to an administrative agency agreement dated March
13, 2006, also with Brown Brothers, whereby Brown Brothers acts as the
administrative agent, transfer agent and registrar for the Fund. The General
Partner also pays the fees of Brown Brothers for its services under this
agreement and such fees will be determined by the parties from time to time.
Currently,
the General Partner pays Brown Brothers for its services in the foregoing
capacity a minimum amount of $300,000 annually and, once the Fund’s net assets
are above $500 million, an asset charge, which is not reflected in either
agreement, ranging between 0.035% and 0.06%, plus a $50,000 transfer agency
fee,
and transaction charges of $7.00 to $15.00 per transaction.
The
Fund
invests primarily in oil futures contracts traded on the New York Mercantile
Exchange (the “Exchange”). The Fund and the Exchange are discussing entering
into and in the process of finalizing a License Agreement whereby the Fund
will
be granted a non-exclusive license to use certain of the Exchange’s settlement
prices and service marks. Under the proposed License Agreement, the Exchange
would receive an asset-based fee for the license, which will be paid by the
Fund.
The
Fund
expressly disclaims any association with the Exchange or endorsement of the
Fund
by the Exchange and acknowledges that “NYMEX” and “New York Mercantile Exchange”
are registered trademarks of such Exchange.
The
Fund
has entered into a brokerage agreement with UBS Securities LLC, formerly
ABN
AMRO Incorporated, Futures Commission Merchant (the “Broker”). The agreement
provides that the Broker charge the Fund commissions of approximately $7
per
round-turn trade plus applicable exchange and NFA fees for futures contracts
and
options on futures contracts.
8
NOTE
4 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND
CONTINGENCIES
The
Fund
engages in the speculative trading of U.S. futures contracts and options
on U.S.
futures contracts, (collectively “derivatives”). The Fund is exposed to both
market risk, which is the risk arising from changes in the market value of
the
contracts; and credit risk, which is the risk of failure by another party
to
perform according to the terms of a contract.
All
of
the contracts currently traded by the Fund are exchange traded. The risks
associated with exchange-traded contracts are generally perceived to be less
than those associated with over-the-counter transactions since, in
over-the-counter transactions, the Fund must rely solely on the credit of
their
respective individual counterparties. However, in the future, if the Fund
were
to enter into non-exchange traded contracts, it would
be
subject to the credit risk associated with counterparty non-performance.
The
credit risk from counterparty non-performance associated with such instruments
is the net unrealized gain, if any. The Company also has credit risk since
the
sole counterparty to all domestic futures contracts is the exchange clearing
corporation. In addition, the Fund bears the risk of financial failure by
the
clearing broker.
The
purchase and sale of futures and options on futures contracts requires margin
deposits with a Futures Commission Merchant (“FCM”). Additional deposits may be
necessary for any loss on contract value. The Commodity Exchange
Act requires an FCM to segregate all customer transactions and assets from
the FCM’s proprietary activities.
The
Fund’s cash and other property such as U.S. Treasury Bills, deposited with an
FCM are considered commingled with all other customer funds subject to the
FCM’s
segregation requirements. In the event of an FCM’s insolvency, recovery may be
limited to a pro rata share of segregated funds available. It is possible
that
the recovered amount could be less than the total of cash and other property
deposited.
For
derivatives, risks arise from changes in the market value of the contracts.
Theoretically, the Fund is exposed to a market risk equal to the value of
futures contracts purchased and unlimited liability on such contracts sold
short. As both a buyer and a seller of options, the Fund pays or receives
a
premium at the outset and then bears the risk of unfavorable changes in the
price of the contract underlying the option.
The
Fund’s policy is to continuously monitor its exposure to market and counterparty
risk through the use of a variety of financial, position and credit exposure
reporting controls and procedures. In addition, the Fund has a policy of
reviewing the credit standing of each broker of counterparty with which it
conducts business.
The
financial instruments held by the Fund are reported in the statement of
financial condition at market or fair value, or at carrying amounts that
approximate fair value, because of their highly liquid nature and short-term
maturity.
The
Fund
received a letter from Goldman, Sachs & Co. (“Goldman Sachs”) on March 17,
2006, providing the Fund notice under 35 U.S.C. Section 154(d) of two pending
United States patent applications, Publication Nos. 2004/0225593A1 and
2006/0036533A1. The Fund is currently reviewing the Goldman Sachs published
patent applications, and has engaged in discussions with Goldman Sachs regarding
their pending applications and the Fund’s own pending patent application. At
this time, due in part to the fact that the Goldman Sachs patent applications
are pending and have not been issued as U.S. Patents, the Fund is unable
to
determine what the outcome of this matter will be.
NOTE
5 - FINANCIAL HIGHLIGHTS
The
following table presents per Unit performance data and other supplemental
financial data for the period for the three months ended September 30, 2006
and
for the period from April 10, 2006 (commencement of operations) to September
30,
2006 for the limited partners. This information has been derived from
information presented in the financial statements.
9
Per
Unit Performance
Three
months
|
April
10, 2006
(commencement
of
|
||||||
ended
|
operations)
to
|
||||||
September
30, 2006
|
September
30, 2006
|
||||||
Net
asset value, beginning of period
|
$
|
69.82
|
$
|
67.39
|
|||
Net
investment income (b)
|
0.66
|
1.23
|
|||||
Net
realized and unrealized loss from investments
(net
of aggregate losses for the period attributable to
redeemed limited partner units) (b)
|
(13.42
|
)
|
(11.56
|
)
|
|||
Net
loss per limited partnership unit
|
(12.76
|
)
|
(10.33
|
)
|
|||
Net
asset value, at September 30, 2006
|
$
|
57.06
|
$
|
57.06
|
|||
Total
Return (Loss) (not annualized)
|
(18.28
|
)%
|
(15.34
|
)%
|
|||
Ratios
to average net assets
|
|||||||
Total
expenses (a)
|
0.64
|
%
|
0.65
|
%
|
|||
Net
investment income (a)
|
4.07
|
%
|
3.96
|
%
|
(a) |
Annualized
|
(b) Per
unit
values have been calculated using the average unit method.
Total
returns are calculated based on the change in value during the period. An
individual limited partner’s total return and ratio may vary from the above
total returns and ratios based on the timing of contributions and
withdrawals.
NOTE
6 - SUBSEQUENT EVENTS
On
October 2, 2006,
the
commodity trading unit of USOF’s clearing futures commission merchant, ABN AMRO
Incorporated, was acquired by UBS Securities LLC. As a result, USOF’s new
futures commission merchant is now UBS Securities LLC.
On
October 18,
2006,
USOF's Registration Statement was declared effective by the U.S. Securities
and Exchange Commission. A primary purpose of that filing was to register
an additional 30,000,000 Units for sale. Several changes to the existing
effective S-1 dated April 10,
2006
relating to language and procedures were also made in this filing. This
included one change that was made in the redemption procedures. The cut-off
on
the third
day
following the placing of a redemption basket order (“T+3”), for delivery of the
Units to USOF’s custodian bank was moved to 3:00 pm New York time from 11:00 am
New York time.
10
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
The
following discussion and analysis should be read in conjunction with the
financial statements and accompanying notes filed as part of this
report.
Forward-Looking
Information
Except
for historical information contained herein, the “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” contains
forward-looking statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995, as amended. These statements involve known
and
unknown risks and uncertainties that may cause our actual results or outcome
to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such differences include, but are not limited to the risk factors set
forth under the caption “Risk Factors” in our Registration Statement declared
effective on October 18, 2006, as filed with the U.S. Securities and Exchange
Commission. In addition to statements that explicitly describe such risks
and
uncertainties, investors are urged to consider statements labeled with the
terms
“believes,” “belief,” “expects,” “intends,” “plans” or “anticipates” to be
uncertain and forward-looking.
Introduction
United
States Oil Fund, LP, a Delaware limited partnership (“USOF”), is a commodity
pool that issues limited partnership units (“Units”) that may be purchased and
sold on the American Stock Exchange. The investment objective of USOF is
for
changes in percentage terms of the Units’ net asset value (“NAV”) to
reflect the changes in percentage terms in the spot price of West Texas
Intermediate (“WTI”) light, sweet crude oil delivered to Cushing, Oklahoma (“WTI
light, sweet crude oil”), less USOF’s expenses.
USOF
seeks to achieve its investment objective by investing in a combination of
oil
futures contracts and other oil interests such that changes in USOF’s NAV,
measured in percentage terms, will closely track the changes in the price
of a
specified oil futures contract (“Benchmark Oil Futures Contract”), also measured
in percentage terms. USOF’s General Partner believes the Benchmark Oil Futures
Contract historically exhibited a close correlation with the spot price of
WTI
light, sweet crude oil.
At
present, on any valuation day the Benchmark Oil Futures Contract is the near
month futures contract for WTI light, sweet crude oil traded on the New York
Mercantile Exchange unless the Near Month Contract will expire within two
weeks
of the valuation day, in which case the Benchmark Oil Futures Contract is
the
Second to Nearest Out Month Contract for WTI light, sweet crude oil traded
on
the New York Mercantile Exchange. “Near Month Contract” means the next contract
traded on the New York Mercantile Exchange due to expire; “Second to Nearest Out
Month Contract” means the first contract traded on the New York Mercantile
Exchange due to expire after the Near Month Contract.
USOF
may
also invest in futures contracts for other types of crude oil, heating oil,
gasoline, natural gas, and other petroleum-based fuels that are traded on
the
New York Mercantile Exchange or other U.S. and foreign exchanges (collectively,
“Oil Futures Contracts”) and other oil interests such as cash-settled options on
Oil Futures Contracts, forward contracts for oil, and over-the-counter
transactions that are based on the price of oil, other petroleum-based fuels,
Oil Futures Contracts and indices based on the foregoing (collectively, “Other
Oil Interests”). The General Partner of USOF, Victoria Bay Asset Management,
LLC, the (“General Partner”), which is registered as a commodity pool operator,
is authorized by the First Amended and Restated Agreement of Limited Partnership
(“LP Agreement”) to manage USOF. The General Partner is authorized by USOF in
its sole judgment to employ, establish the terms of employment for, and
terminate commodities trading advisors or futures commission
merchants.
Valuation
of Crude Oil Futures Contracts and the Computation of the Net Asset
Value
The
NAV
of USOF Units is calculated once each trading day. The NAV for a particular
trading day is released after 4:15 p.m. New York time. NAV is calculated as
of the earlier of the close of the New York Stock Exchange or 4:00 p.m. New
York time. Trading on the American Stock Exchange typically closes at
4:15 p.m. New York time. USOF uses the New York
11
Mercantile
Exchange closing price (determined at the earlier of the close of that exchange
or 2:30 p.m. New York time) for the contracts held on the New York
Mercantile Exchange, but calculates or determines the value of all other
USOF
investments as of the earlier of the close of the New York Stock Exchange
or
4:00 p.m. New York time.
Management’s
Discussion of Results of Operation and the Crude Oil
Market
Results
of operations. On
April
10, 2006, USOF listed its Units on the American Stock Exchange under the
ticker
symbol “USO.” On that day USOF established its initial NAV by setting the price
at $67.39 per Unit and issued 200,000 Units to the Initial Authorized Purchaser,
KV Execution Services LLC, in exchange for $13,478,000 in cash. USOF also
commenced investment operations on that day by purchasing oil futures contracts
traded on the New York Mercantile Exchange that are based on WTI light, sweet
crude oil. The total market value of the crude oil futures contracts purchased
on that day was $13,418,501 at the time of purchase. USOF established cash
deposits equal to $13,478,000 at the time of the initial sale of Units. The
majority of those cash assets were held at USOF’s custodian bank while less than
10% of the cash balance was held as margin deposits with USOF’s futures
commission merchant relating to the Oil Futures Contracts
purchased.
Portfolio
Expenses.
USOF’s
expenses consist of investment management fees and commissions. The investment
advisory fee that USOF pays to the General Partner is calculated as a percentage
of the total net assets of USOF. For total net assets of up to $1 billion,
the
investment advisory fee is 0.5%. For assets over $1 billion, the investment
advisory fee is 0.2% on the incremental amount of assets. During the period
from
July 1, 2006 to September 30, 2006, the daily average total net assets of
the
USOF were approximately $359,609,583. At no time during the period from July
1,
2006 to September 30, 2006, did the total net assets of USOF exceed $1 billion.
The investment advisory fee paid by USOF amounted to $452,264, which was
calculated at the 0.50% rate and accrued daily.
USOF
also incurs commissions to brokers for the purchase and sale of futures
contracts, other oil interests, or U.S. Treasury bills and notes. During
the
period from July 1, 2006 to September 30, 2006, total commissions paid amounted
to $129,645. Prior to the initial offering, USOF had estimated that the annual
level of such commissions for USOF was expected to be 0.35% of total net
assets.
As an annualized percentage of total net assets, the third quarter figure
represents approximately 0.14% of total net assets. However, there can be
no
assurance that commission costs and portfolio turnover will not cause commission
expenses to rise in future quarters.
Expenses
incurred from inception through September 30, 2006 in connection with organizing
USOF and the initial offering costs of the Units were borne by the General
Partner, and are not subject to reimbursement by USOF.
Interest
Income.
USOF
seeks to invest its assets such that it holds crude oil futures contracts
and
other oil interests in an amount equal to the total net assets of the portfolio.
Typically, such investments do not require USOF to pay the full amount of
the
contract value at the time of purchase, but rather require USOF to post an
amount as a margin deposit against the eventual settlement of the contract.
As a
result, USOF retains an amount that is approximately equal to its total net
assets, which USOF invests in cash deposits or in U.S. Treasuries. This includes
both the amount on deposit with the futures brokerage firms as margin as
well as
unrestricted cash held with USOF’s custodian bank. The cash or U.S. Treasuries
earn interest that accrues on a daily basis. For the period from July 1,
2006
through September 30, 2006, USOF earned $4,233,056 in interest income on
such
cash holdings. Based on USOF’s average daily total net assets, this is
equivalent to an annualized yield of 4.7%. USOF did not purchase U.S. Treasury
bills or notes during the period from July 1, 2006 through
12
September
30, 2006 and held all of its funds in cash or cash equivalents during this
time period..
Tracking
USOF’s Benchmark.
USOF
seeks to manage its portfolio such that changes in its average daily NAV,
on a
percentage basis, closely track changes in the average daily price of the
Benchmark Oil Futures Contract, also on a percentage basis. Specifically,
USOF seeks to manage the portfolio such that over any rolling 30-day period,
the
average daily change in the NAV is within a range of 90% to 110% (0.9 to
1.1),
of the average daily change of the Benchmark Oil Futures Contract. As an
example, if the average daily movement of the Benchmark Oil Futures Contract
for
a particular 30-day time period was 0.5% per day, USOF management would attempt
to manage the portfolio such that the average daily movement of the NAV during
that same time period fell between 0.45% and 0.55% (i.e.,
between 0.9 and 1.1 of the benchmark’s results). USOF’s portfolio management
goals do not include trying to make the nominal price of USOF’s NAV equal to the
nominal price of the current Benchmark Oil Futures Contract. Management
believes that it is not practical to manage the portfolio to achieve such
an
investment goal when investing in listed crude oil futures
contracts.
For
the
30 valuation days ending September 30, 2006, the simple average daily change
in
the Benchmark Oil Futures Contract was -0.456 %, while the simple average
daily change in the NAV of USOF over the same time period was -0.473 %. The
average daily difference was 0.017 % (or 1.7 basis points, where 1 basis
point
equals 1/100 of 1%). As a percentage of the daily movement of the Benchmark
Oil
Futures Contract, the average error in daily tracking by the NAV was 4.47
%,
meaning that over this time period USOF’s tracking error was within the plus or
minus 10% range established as its benchmark tracking goal.
![](https://www.sec.gov/Archives/edgar/data/0001327068/000100371506000420/benchmark.jpg)
Since
the
offering of USOF Units to the public on April 10, 2006, the simple average
daily
change in the Benchmark Oil Futures Contract was -0.0133%, while the simple
average daily change in the NAV of USOF over the same time period was -0.0147
%.
The average daily difference was 0.013% (or 1.3 basis points), where 1 basis
point equals 1/100 of 1%). As a percentage of the daily movement of the
Benchmark Oil Futures Contract, the average error in daily tracking by the
NAV
was 3.54 %, meaning that over this time period USOF’s tracking error was within
the plus or
13
minus
10%
range established as its benchmark tracking goal.
An
alternative tracking measurement of the return performance of USOF versus
the
return of its benchmark can be calculated by comparing the actual return
of
USOF, measured by changes in its Net Asset Value (NAV), versus the expected
changes in its NAV under the assumption that USOF’s returns had been exactly the
same as the daily changes in its benchmark. As a point of reference, the
second
quarter ended and the third
quarter
began with the August 2006 contract as the Benchmark Oil Futures Contract.
The
Benchmark Oil Futures Contract then became the September 2006 contract and
the
third
quarter
ended with the October 2006 contract as the Benchmark Oil Futures
Contract.
For
the
period from July 1, 2006 through September 30, 2006, the actual total return
of
USOF as measured by changes in its NAV was -18.28%. This is based on NAV of
$69.82 on June 30 and an ending NAV as of September 30 of
$57.06 (During this time period USOF made no distributions to its unit holders).
However, if USOF’s daily changes in its NAV had instead exactly tracked the
changes in the daily return of the Benchmark Oil Futures Contracts, USOF
would
have ended the third quarter with an estimated NAV of $56.54, for a total
return
over the relevant time period of -19%. The difference between the actual
NAV
total return of USOF of -18.2% and the expected total return based on the
Benchmark Oil Futures Contracts of 19% was an error over the time period
of
+0.8%, which is to say that USOF’s actual total return exceeded the benchmark
result by that percentage. Management believes that the majority of the
difference between the actual return and the expected benchmark return can
be
attributed to the impact of the interest that USOF collects on its cash and
cash
equivalent holdings less any expenses. In addition, during the period USOF
also
collected fees from brokerage firms creating or redeeming baskets of Units.
This
income also contributed to USOF’s actual return exceeding the benchmark results.
However, if the total assets of USOF continue to increase, Management believes
that the impact on total returns of these fees from creations and redemptions
will diminish as a percentage of the total return.
Of
the
various factors that could impact USOF’s ability to accurately track its
benchmark, there are currently three factors that have during the latest
period,
or are most likely to impact in the future, these tracking results.
The
first
major factor that could affect tracking results is if USOF buys or sells
its
holdings in the then current Benchmark Oil Futures Contract at a price other
than the closing settlement price of that contract on the day in which USOF
executes the trade. In that case, USOF may get a price that is higher, or
lower,
than that of the Benchmark Oil Futures Contract, which, if such transactions
did
occur, could cause the changes in the daily NAV of USOF to either be too
high or
too low relative to the changes in the daily benchmark. In the third quarter
of
2006, management attempted to minimize the effect of these transactions by
seeking to execute its purchase or sales of the Benchmark Oil Futures Contracts
at, or as close as possible to, the end of the day settlement price. However,
it
is not always possible for USOF to obtain the closing settlement price and
there
is no assurance that failure to obtain in the future will not adversely impact
USOF’s attempt to track its benchmark over time.
The
second major factor that could affect tracking results is the interest that
USOF earns on its cash and U.S. Treasury holdings. USOF is not required to
distribute any portion of its income to its unit holders and did not make
any
distribution to unit holders in the third quarter of 2006. Interest payments,
and any other income, were retained within the portfolio and added to USOF’s
NAV. When this income exceeds the level of USOF’s expenses for its investment
advisory fee and its brokerage commissions, USOF will realize a net yield
that
will tend to cause daily changes in the NAV of USOF to track slightly higher
than daily changes in the Benchmark Oil Futures Contracts. During the third
quarter of 2006, USOF earned on an annualized basis approximately 4.7% on
its
cash holdings. It also incurred cash expenses on an annualized basis of .5%
for
investment advisory fees and approximately 0.14% in brokerage commission
costs
related to the purchase and sale of futures contracts. During the latest
period,
the foregoing resulted in a net yield on an annualized basis of approximately
4.1% affected USOF’s ability to track its benchmark. If short-term interest
rates rise above the current levels, the level of deviation created by the
yield
would increase. Conversely, if short-term interest rates were to decline,
the
amount of error created by the yield would decrease. If short term yields
drop
to a level lower than the combined expenses of the
14
investment
advisory fee and the brokerage commissions, then the tracking error would
become
a negative number and would tend to cause the daily returns of the NAV to
under
perform the daily returns of the Benchmark Oil Futures
Contracts.
The
third
major factor affecting tracking results is if USOF holds oil related investments
in its portfolios, other than the current Benchmark Oil Futures Contract,
that fail to closely track the Benchmark Oil Futures Contract’s total
return movements. In that case, the error in tracking the benchmark can result
in daily changes in the NAV of USOF that are either too high or too low relative
to the daily changes in the benchmark. During the third quarter of 2006,
since
USOF did not hold any oil related investments other than the then current
Benchmark Oil Futures Contract. However, there can be no assurance that in
future quarters USOF will not make use of such non-benchmark oil related
investments.
Crude
oil market.
During
the period from July 1, 2006 to September 30, 2006, crude oil prices were
impacted by several factors. On the consumption side, demand remained strong
as
continued global economic growth, especially in emerging economies such as
China
and India, remained brisk. On the supply side, production remained steady
despite concerns about the possible negative impact of hurricanes in the
U.S.
Gulf Coast area and violence impacted production in Iraq and Nigeria. During
the
third
quarter,
the oil producing portions of the Gulf Coast was not subject to a repeat
of
2005’s disastrous storms. In addition, although the crude oil market’s concerns
about geo-political issues regarding other key crude oil producing countries,
such as Iran and Venezuela, remained, such concerns appear to have moderated
at
least in the short term. As a result of the foregoing, crude oil prices trended
lower over the course of the third quarter of 2006 and showed periods of
greater
than usual volatility.
The
closing price on June 30, 2006 of the then near month WTI light, sweet crude
oil
futures contract traded on the New York Mercantile Exchange was $73.98. During
the period from July 1, 2006 to September 30, 2006, the highest price of
the
USOF’s Benchmark Oil Future Contract was $78.71, which occurred in mid July
of 2006, and the lowest price was $60.55, which was reached in late September
2006. As of September 30, 2006, the closing price of the then near month
WTI
light, sweet crude oil futures contract traded on the New York Mercantile
Exchange was $62.91.
Subsequent
Events
On
October 2, 2006,
the
commodity trading unit of USOF’s clearing futures commission merchant, ABN AMRO
Incorporated, was acquired by UBS Securities LLC. As a result, USOF’s new
futures commission merchant is now UBS Securities LLC.
On
October 18,
2006,
USOF's Registration Statement was declared effective by the U.S. Securities
and Exchange Commission. A primary purpose of that filing was to register
an additional 30,000,000 Units for sale. Several changes to the existing
effective S-1 dated April 10,
2006
relating to language and procedures were also made in this filing. This included
one change that was made in the redemption procedures. The cut-off on the
third
day
following the placing of a redemption basket order (“T+3”), for delivery of the
Units to USOF’s custodian bank was moved to 3:00 pm New York time from 11:00 am
New York time.
Critical
Accounting Policies
Preparation
of the financial statements and related disclosures in compliance with
accounting principles generally accepted in the United States of America
requires the application of appropriate accounting rules and guidance, as
well
as the use of estimates. USOF's application of these policies involves judgments
and actual results may differ from the estimates used. The General Partner
has
evaluated the nature and types of estimates that it makes in preparing USOF's
financial statements and related disclosures and has determined that the
valuation of its investments which are not traded on a United States or
internationally recognized futures exchange (such as forward contracts and
over-the-counter contracts) involves a critical accounting policy. While
not
currently applicable given the fact that during the time period covered by
this
report, USOF was not involved in this type of trading activity, the values
used
by USOF for its forward contracts are provided by its commodity broker who
uses
market prices when available, while over-the-counter contracts are valued
based
on the
15
present
value of estimated future cash flows that would be received from or paid
to a
third party in settlement of these derivative contracts prior to their delivery
date and valued on a daily basis.
Liquidity
and Capital Resources
USOF
does
not anticipate making use of borrowings or other lines of credit to meet
its
obligations. USOF has met, and it is anticipated that USOF will meet, its
liquidity needs in the normal course of business from the proceeds of the
sale
of its investments or from cash and/or short-term U.S. Treasuries that it
intends to hold at all times. USOF’s liquidity needs include: redeeming Units,
providing margin deposits for its existing oil futures contracts on the purchase
of additional crude oil futures contracts and posting collateral for its
over-the-counter contracts and payment of its expenses, summarized below
under
“Contractual Obligations.”
USOF
currently generates cash primarily from (i) the sale of Creation Baskets
and
(ii) interest earned on cash. USOF allocated its nets assets to trading in
oil
interests. A portion of the NAV was held in cash that was used as margin
for USOF's trading in oil interests. Cash or U.S. Treasuries as a percentage
of
the total net assets will vary from period to period as the market values
of the
oil interests change. The balance of the net assets is held in USOF's Oil
Futures Contracts and Other Oil Interests trading account. Interest earned
on
USOF's interest bearing-funds is paid to USOF.
USOF's
investment in oil interests will be subject to periods of illiquidity because
of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit the fluctuations in Oil Futures Contracts prices
during a single day by regulations referred to as “daily limits.” During a
single day, no trades may be executed at prices beyond the daily limit. Once
the
price of an Oil Futures Contract has increased or decreased by an amount
equal
to the daily limit, positions in the contracts can neither be taken or
liquidated unless the traders are willing to effect trades at or within the
limit. Such market conditions could prevent USOF from promptly liquidating
its
positions in Oil Futures Contracts. Through April 10, 2006, all of USOF's
and the General Partner's expenses were funded by their affiliates. Since
April
10, 2006, these expenses have been borne by USOF and the General Partner
except
that their affiliate provided the funds for USOF's payment of a portion of
the
fees due to the SEC and the NASD in connection with USOF's registration of
additional units during October. Neither USOF nor the General Partner has
any
obligation or intention to refund such payments by their affiliates. These
affiliates are under no obligation to continue payment of USOF's or the General
Partner's expenses. If such affiliates were to discontinue the payment of
these
expenses and the General Partner and USOF are unsuccessful in raising sufficient
funds to cover USOF's expenses or in locating any other source of funding,
USOF
will terminate and investors may lose all or part of their
investment.
Market
Risk
Trading
in Oil Futures Contracts and Other Oil Interests such as forwards, will involve
USOF entering into contractual commitments to purchase or sell oil at a
specified date in the future. The gross or face amount of the contracts
will significantly exceed USOF's future cash requirements since USOF intends
to
close out its open positions prior to settlement. As a result, USOF should
only
be subject to the risk of loss arising from the change in value of the
contracts. USOF considers the "fair value'' of its derivative instruments
to be
the unrealized gain or loss on the contracts. The market risk associated
with
USOF's commitments to purchase oil will be limited to the gross face amount
of
the contacts held. However, should USOF enter into a contractual commitment
to
sell oil, it would be required to make delivery of the oil at the contract
price, repurchase the contract at prevailing prices or settle in cash. Since
there are no limits on the future price of oil, the market risk to USOF could
be
unlimited. USOF's exposure to market risk will depend on a number of factors
including the markets for oil, the volatility of interest rates and foreign
exchange rates, the liquidity of the Oil Futures Contracts and Other Oil
Interests markets and the relationships among the contracts held by USOF.
The
limited experience that USOF has had in utilizing its model to trade in oil
interests in a manner intended to track the spot price of oil, as well as
drastic market occurrences, could ultimately lead to the loss of all or
substantially all of an investor’s capital.
16
Credit
Risk
When
USOF
enters into Oil Futures Contracts and Other Oil Interests, it will be exposed
to
the credit risk that the counterparty will not be able to meet its obligations.
The counterparty for the Oil Futures Contracts traded on the New York Mercantile
Exchange and on most other foreign futures exchanges is the clearinghouse
associated with the particular exchange. In general, clearinghouses are backed
by their members who may be required to share in the financial burden resulting
from the nonperformance of one of their members and therefore, this additional
member support should significantly reduce credit risk. Some foreign exchanges
are not backed by their clearinghouse members but may be backed by a consortium
of banks or other financial institutions. There can be no assurance that
any
counterparty, clearinghouse, or their members or financial backers will satisfy
their obligations to USOF. The General Partner will attempt to manage the
credit
risk of USOF by following various trading limitations and policies. In
particular, USOF intends to post margin and/or hold liquid assets that will
be
approximately equal to the face amount of its obligations to counterparties
under the Oil Futures Contracts and Other Oil Interests it holds. The General
Partner will implement procedures that will include, but will not be limited
to,
executing and clearing trades only with creditworthy parties and/or requiring
the posting of collateral or margin by such parties for the benefit of USOF
to
limit its credit exposure. UBS Securities LLC, formerly ABN AMRO Incorporated,
USOF's commodity broker (the "Broker"), or any other broker that may be retained
by USOF in the future, when acting as USOF's futures commission merchant
in
accepting orders to purchase or sell Oil Futures Contracts on United States
exchanges, will be required by the U.S. Commodities Futures Trading Commission
(“CFTC”) regulations to separately account for and segregate as belonging to
USOF, all assets of USOF relating to domestic Oil Futures Contracts trading.
These commodity brokers are not allowed to commingle USOF's assets with their
other assets. In addition, the CFTC requires commodity brokers to hold in
a
secure account the USOF assets related to foreign Oil Futures Contracts
trading.
Off
Balance Sheet Financing
As
of
September 30,
2006,
USOF has no loan guarantee, credit support or other off-balance sheet
arrangements of any kind other than agreements entered into in the normal
course
of business, which may include indemnification provisions relating to certain
risks that service providers undertake in performing services that are in
the
best interests of USOF. While USOF's exposure under these indemnification
provisions cannot be estimated, they are not expected to have a material
impact
on USOF's financial position.
Redemption
Basket Obligation
Other
than the liquidity necessary to meet its investment objective and pay its
contractual obligations described below, USOF will require liquidity to redeem
Redemption Baskets. USOF intends to satisfy this obligation through the sale
of
its U.S. Treasuries or cash in an amount proportionate to the number of Units
being redeemed, as described above under "Determination of Redemption
Distribution.''
Contractual
Obligations
USOF's
primary contractual obligations are with the General Partner. In return for
its
services, the General Partner is entitled to a management fee calculated
as a
fixed percentage of USOF's NAV, currently .50% for an NAV of $1 billion or
less,
and thereafter .20% of the NAV above $1 billion. The General Partner or its
affiliate has agreed to pay the start-up costs associated with the formation
of
USOF, primarily its legal, accounting and other costs in connection with
its
registration with the CFTC as a commodity pool operator and the registration
and
listing of USOF with the U.S. Securities and Exchange Commission (“SEC”) and the
American Stock Exchange, respectively. The General Partner has agreed to
pay the
fees of the custodian and transfer agent, Brown Brothers Harriman & Co., as
well as Brown Brothers Harriman & Co.'s fees for performing administrative
services, including in connection with USOF's preparation of its financial
statements and its SEC and CFTC reports. The General Partner will also pay
the
fees of USOF's accountants and a separate firm for providing tax-related
services, as well as those of its marketing agent, ALPS Distributors, Inc.
The
General Partner is also in the process of negotiating a licensing agreement
with
the
17
New
York
Mercantile Exchange under which certain licensing fees will be paid to the
exchange by USOF.
In
addition to the General Partner's management fee, USOF pays its brokerage
fees,
over-the-counter dealer spreads, fees to the Broker, and extraordinary expenses.
The latter are expenses not in the ordinary course of its business, including
the indemnification of any person against liabilities and obligations to
the
extent permitted by law and under the LP Agreement, the bringing or defending
of
actions in law or in equity or otherwise conducting litigation and incurring
legal expenses and the settlement of claims and litigation. Commission payments
to the Broker are on a contract-by-contract, or round turn, basis.
The
parties cannot anticipate the amount of payments that will be required under
these arrangements for future periods, as USOF's net asset values and trading
levels to meet its investment objectives will not be known until a future
date.
These agreements are effective for a specific term agreed upon by the parties
with an option to renew, or, in some cases, are in effect for the duration
of
USOF's existence. The parties may terminate these agreements earlier for
certain
reasons listed in the agreements.
Quantitative
and Qualitative Disclosures About Market
Risk
|
None.
Controls
and Procedures
|
The
duly
authorized officers of Victoria Bay Asset Management, LLC, USOF’s General
Partner, who perform functions equivalent to those a principal executive
officer
and principal financial officer of USOF would perform if the USOF had any
officers, have evaluated the effectiveness of USOF’s disclosure controls and
procedures, and have concluded that the disclosure controls and procedures
of
USOF have been effective as of the end of the period covered by this quarterly
report.
There
were no changes in USOF’s internal control over financial reporting during
USOF’s last fiscal quarter that have materially affected, or are reasonably
likely to materially affect USOF’s internal control over financial
reporting.
Legal
Proceedings
|
None.
Risk
Factors
|
There
has
been not a material change from the risk factors previously disclosed in
the
registrant’s Form S-1, effective October 18, 2006.
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
None.
Defaults
Upon Senior Securities
|
None.
Submission
of Matters to a Vote of Security
Holders
|
None.
18
Other
Information
|
Monthly
Account Statements
Pursuant
to the requirement under part 4.22 of the Commodities Exchange Act, each
month
USOF publishes an account statement for its unit holders, which includes
a
statement of income (loss) and a statement of changes in net asset value.
The
account statement is filed with the U.S. Securities and Exchange Commission
on
Form 8-K - Current Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, and posted each month on USOF’s website at www.usoilfund.com.
Exhibits
|
Exhibits
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
United
States Oil Fund, LP (Registrant)
By:
Victoria Bay Asset Management, LLC, its general partner
|
By:
/s/ Nicholas D.
Gerber
|
Nicholas
D. Gerber
|
Chief
Executive Officer
|
DateDate: November
10, 2006
|
By:
/s/ Howard
Mah
|
Howard
Mah
|
Chief
Financial Officer
|
DateDate:
November 10, 2006
|
19