Selling BPT would not raise money for BP since the units are not owned by BP. However it is conceivable they could create a new royalty trust to raise money.
BP Could Defer To Royalty By LIAM DENNING
A quick sale of its Alaskan assets to Apache would be a neat way for BP to raise cash. But there is no guarantee of that deal happening, so it is worth examining other options.
A possible route is one BP has taken before: the creation of a royalty trust. BP Prudhoe Bay Royalty Trust has been listed in New York (ticker: BPT) since 1989.
The trust owns 16.4% of the first 90,000 barrels per day of BP's oil from the Prudhoe Bay field in Alaska. The oil sells at a price tied to average oil prices, net of costs and production taxes. The bulk of profits, exempt from corporate tax, are paid out.
This structure offers investors more direct exposure to spot oil prices than funds invested in oil futures. For example, the U.S. Oil Fund is down by half since its inception in April 2006, despite crude prices on the New York Mercantile Exchange having risen 11%. BPT units are up 22%. BPT also would be unaffected by any regulatory crackdown in derivatives markets or increases in corporate-tax rates. And it offers a dividend yield of more than 9%.
BP conceivably could create a "BPT 2." Prudhoe Bay's declining production is of concern. However, BPT's royalty payments should run through 2023, according to a consultant's report attached to the last annual 10-K filing. The same report pegged the net present value of BPT's future revenue at $836.6 million, based on 2009 oil prices. BPT's market capitalization of $1.9 billion suggests investors are betting on oil prices to rise.
Raising a couple billion dollars would get BP only so far. But if corporate buyers for Alaska prove elusive, why not tap the broader market?