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BP Prudhoe Bay Royalty Trust Message Board

  • skithrax skithrax May 10, 2003 10:50 PM Flag

    all you need to know about oil prices

    Relatively modest changes in oil prices will significantly affect the Trust's revenues and results of operations. Crude oil prices are subject to significant changes in response to fluctuations in the domestic and world supply and demand and other market conditions as well as the world political situation as it affects OPEC and other producing countries. The effect of changing economic conditions on the demand and supply for energy throughout the world and future prices of oil cannot be accurately projected.

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    • looks like you have it covered pretty well

    • Ganjabless: You still don't get it, do you? It makes no difference to me whether this stock goes to $20 or $25. I will continue to short on the way up. The only thing that is disappointing is that I could have sold short my entire lot at those inflated prices.

      All that I care about is that this stock is inefficiently priced. There is virtually only one variable which makes any difference to the underlying value of the trust -- WTI price forecast. I've already locked in my risk mitigation on that with options on oil futures contracts at $25 and $30 with various expiration dates. So if oil goes through the roof, I get paid handsomely on the options. If oil falls, so will BPT distributions (and I expect, the unit stock price).

      This is a medium term, almost risk-free investment for me. And the distributions? Ha! That is the biggest joke. I have no problem paying. Do the math. It is really simple. Let's see... Average distribution of $1.50 over the next six years equals, hmmmm, oh yeah, $9.00. At $25-30 oil prices over the next six years, that is what I have to pay out, and probably less. Then the trust will disolve and BPT will be zero. In return, today I get $14-15 in cash plus the use of that cash over the next six years. Come on. I rarely see such opportunities. Do you?

    • Nice Coastal Mountain gets message 1000 and ganja bless owns 3000 BPT

      valuestock: keep shorting your odd lots, its great that there are buyers on the other side of your short sale keeping my capital appreciating, you might just help this thing hit another 52 week high...keep up the good work, and have fun paying the distribution in July

    • I am very optimistic about high oil prices for at least the next 6 months...but I would not BPT at this leave. I would not buy above $15.00 just my opinion...

    • capx: I would be less than honorable if I did not caution you with my current valuation of BPT. The future of BPT distributions are based almost exclusively on the price of WTI. While I am not going to sit here and tell you that I know what the exact price of oil will be each month for the next 6 years, I do believe that the crude futures contracts give the best picture of where the "efficient" market thinks oil prices will be -- so much so that they put their money where their mouth is and allow you to buy or sell the contracts and lock in that price.

      If you agree with the philosophy of taking the oil futures contract prices as a good indicator, you can apply those prices to determine the future distributions of BPT. If you do, you may think twice about buying at this price. JMHO.

      In full disclosure, I am short BPT, and have recently added to my short position.

      Best of luck, whatever you decide to do.

    • valuestock2000,
      Thanks for the information. I have had some experience with limited partnerships in the past and the tax filing requirements. Hence my question to the Board.

      I plan to put BPT units in the taxable account as your information suggests - not a couple of hundred units, but a lot more.

      I see some Canadian Royal Trusts distributions at high rates.

    • i leave mine to my cpa, as my returns are rather complicated due to types of income etc.he is also my broker. so he knows my whole picture

    • I hold BPT in an IRA and that avoids alot of paperwork...however..it also does not let you take certain tax breaks.

    • Thank you for your constructive comments regarding the implications of BPT in an IRA. I am sure that capx9 now fully appreciates your expertise.

    • up yours, go to the beach and give or get some

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