DALLAS - The University of Texas System regents last week shelved plans to sell future production from oil and gas properties to boost the Permanent University Fund until prices rebound.
Meeting in El Paso, the regents also announced 3,800 layoffs at the University of Texas Medical Branch in Galveston, which is struggling to recover from Hurricane Ike.
Oil prices were near record highs at over $140 per barrel when the forward sale of production was under consideration. Since then, oil has fallen by more than 50%. Regents said the sale should not take place unless oil rises to at least $100.
Even at $100 per barrel, a forward sale would raise about $300 million less than the $1 billion originally contemplated. The regents wanted to sell the properties to diversify the portfolio of the nearly $12 billion PUF that backs bonds issued by the University of Texas and Texas A&M systems for their 18 campuses and six agencies.
UT has earned royalties from oil and gas leases on its 2.1 million acres since 1923. Had the sale occurred, it would have been the first. The system planned to sell a volume of future production instead of selling land or mineral rights. Banks, oil companies, or other bidders would have bought the oil and gas through a competitive process.
University of Texas Investment Management Co. manages the Permanent University Fund and would handle the details of any sale. About 5% of PUF assets are distributed annually for construction, library purchases, and research equipment.
PUF funds cannot be used for operating costs at the UT Medical Branch in Galveston, which has suspended operations during the recovery from hurricane damage. Employees had been on administrative leave, but at the rate of $40 million per month, continuing to pay workers would deplete UTMB's finances in about three months, the regents said.
"The UT System does not have resources available to cover the ongoing operating expenses and needs of UTMB," the regents said in a statement. It added that they "cannot use Permanent University Funds, available university funds, or monies to be provided by the Federal Emergency Management Agency to fund operating expenses, or the payment of wages and benefits at UTMB."
