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BP Prudhoe Bay Royalty Trust Message Board

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  • diogenes1234 diogenes1234 Jul 16, 2003 10:46 AM Flag

    This is getting nasty. I see !

    Valuestock:

    I believe you have worked the numbers. How far might BPT be taken if an arbitrage is being put in place using crude futures? Assume a near term minimum acceptable return of 20% and unlimited funds.

    Thanks.

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    • Nymex Crude Oil Futures are currently showing roughtly the following...
      2003 $30.00
      2004 $27.50
      2005 $24.80
      2006 $24.30
      2007+ $24.00

      When I put that up against chargeable costs, total remaining distributions are $5.38. A short seller also gets the use of short proceeds to invest otherwise or collect interest, and over time pay out this $5.38. Based on the oil price futures, the trust should be trading in the $4-7 range, depending on market mood. $19 was ridiculous and $16 is just the beginning of the tumble. Like I have said all along, it doesn't matter if this trust falls to $4 today, tommorrow, or a year from now. If you sell short at anything above $8 or $9, you are virtually guaranteed to realize a >50% rate of return.

      BTW, I recently shared the model with a large private equity fund manager. I would not be surprised if this tumble is their doing. Knowing that they have over $10 billion in available capital, I would not be surprised at all if they relentlessly push BPT to single digits over the next few months. While I am simply a pauper picking up scraps, I sure will enjoy their short money at work!

      Best,

      • 2 Replies to valuestock2000
      • Hello Valuestock2000

        We talked long ago about BPT. It would be highly desirable if you had simular knowledge about Viking and Ultima energy trust. I have been getting 21% pay out on those with incresing reserve life. Way to go management.I also beleived BPT was way overvalued as well.I did not short the stock but probably would be a good move.People see the present distribution being nearly18% and think that is for all year long. Cost are a major consideration the way BPT is set up. Know one knows where this will settle but as I said before $14 is perhaps resonable on the high end for me to be confortable.
        Cheers ProTicker

 
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