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BP Prudhoe Bay Royalty Trust Message Board

• onassisfs onassisfs Jun 16, 2002 7:03 AM Flag

Diogenes1234 + enviro111

Diogenes1234/enviro111,

Sorry for the late reply, I just forgot to look at the BPT board.

Regarding the additional 12% return (above the U\$ 0.40/q) to offset depletion, based on a previous price/entry point of U\$ 13.11 per unit:

Total return 12% of 13.11 = U\$ 1.57; roughly another U\$ 0.40/q; Total of U\$ 0.80/q or U\$ 3.20/pa

90,000 barrels x 16,2% = rounded 14 Kb x 90 days = 1.26 miob for one quarter.
CPI: 1.4 (just an assumption; it was at 1.366 at Q1 2002)
Chargeable cost: U\$ 12 (to bring in a longer term horizon, I am using the 2004 cc)
Cc: 12 x 1.4 = U\$ 16.8.
Production taxes: 4.5 x 1.4 = U\$ 6.3.

So the formula is:

(WTI-16.8) - ((WTI-6.3) x 0.15) = 0.8
21.4 mio units
which leads us to a WTI of

(34.75 � 16.8) � ((34.75-6.3) x 0.15) = 0.8
17.95 � (28.45 x 0.15) = 0.8
17.95 � 4.27 = 0.8 ---> 13.68 x 1.26 miob = U\$ 17.24 = U\$ 0.8/q
21.4 mio u

So the price for WTI is approx. U\$ 34.75 per barrel and not 36 as I had posted earlier (I was just using �rule of thumb� at that time; sorry).

You see, there are, as I have posted earlier here on this board a lot of unknown variables, so the above calculation is just a rough assumption.

Regarding futures: I agree that one should not try do that on margin. But if you take a longer time frame, i.e. more than two years, and if you use only cash, I see a good chance that you can profit of a rising price environment. For example I got into the December 2004 contract in December 2001

http://quotes.ino.com/chart/?s=NYMEX_CLZ4&v=dmax

with my own, REAL money at just under U\$ 21. So far, it has behaved nicely. But I still con-sider that as a risk-so please do your own DD.

Disclosure: I also own PGH (unfortunately Yahoo still doesn�t offer a board), PVX and ERF.

Regards and best investment luck
onassisfs

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