I stand by my message board post, which projects much higher inflation and oil prices than a simplistic 1% per annum. As to the question of declining production, see my comments on the relationship of BPT's field to other NS fields/deposits. In addition, it should be noted that BP has NOT exhausted possible ways of stimulation: Minimal chemical injections have been used (due expense and supply issues) and horizontal drilling has only recently been started.
In addition, two important matters were not considered:
(1) Even if at some point the price of oil (relative to the charges) declined enough to stop current distributions, the royalty and trust assets do NOT go to zero nor revert to BP or its successor. Instead, the royalty interest would be put up for sale (presumably to some one willing to speculate on an oil price rise) or be repurchased by BP/successor and the proceeds distributed along with the cash reserve being held by the trustee.
(2) Current production is being affected by TAPS spills and M&R. Given the importance of this In AK, this is IMO only temporary, since AK needs the revenue and will do whatever it takes to get a better/lasting fix to these problems from the aging lines and equipment, especially with development/expansion plans for other NS fields/deposits.
Good points, what are your thoughts on the profit tax the State passed a couple of years ago??
Some reading & sources tell me that the oil companies are pulling back in Alaska or out of Alaska because the state takes most/all of the profit when oil is +$100. I think AK made a big mistake when they passed this tax when oil was around $140.
Sounds similar to Obama's plan to tax the rich more ??
I expect the first thing a Republican President will do is to by executive order repeal the ban on exploration on current bans on Federal lands on the north slope. Now is the time to buy any AK oil and gas companies along with drillers and pipeline cos. I bought at the 3/09 lows and made a bundle. I have been buying every day just as I did back then. Good luck to all!
Excellent analysis. However, do you know the current projected date/year when the BPT field will run out of oil? I seem to recall that current reserves are conservatively estimated to run at least another 10 years.
The date when the Prudhoe Bay field runs out of oil doesn't matter... BPT will terminate long before that happens. Because the NPV of future distributions (even with very optimistic assumptions) is below the current market price, I believe BPT may be suitable for speculation but not investment.
You are ignoring the issue of rapidly accelerating chargeable costs (with a 'kneee of the curve' around 2018) which is a more important factor than any of the things you mention. There was a previous seekingalpha article (around 6 months or so ago) which laid this out graphically. Even if production stays steady and oil prices increase dramatically, the increasing chargeable costs will be a huge headwind which will be hard to overcome. I think everyone is ignoring that factor - even though it is the most important of all - probably because they don't understand it. Much easier to talk about production or prices.
I know you post because you are so concerned about our BPT investments. Please stop posting and just short BPT. I am tired of reading about the "chargeable costs", would rather see you make some money. GL