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BP Prudhoe Bay Royalty Trust Message Board

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

    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


    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

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