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BP Prudhoe Bay Royalty Trust Message Board

  • roundrobinjack roundrobinjack Jun 2, 2013 2:16 PM Flag

    Preliminary Distribution Est and Other Matters

    With 2/3rds of Q2 done, the upcoming July distribution is taking shape. However, the recent price rise in BPT is perhaps of greater concern, This has come at a time when WTI prices and AK North Slope production are BOTH decining. As a result, I believe the sole reason for the price rise is EXCESSIVE OPTIMISM due the recent action by the AK legislature to repeal Palin's progressive tax component A.C.E.S. IMO this is certain to be the subject of a ballot initiative in next year's election (where Parnell could also face a keep-the-taxes-high opponent). I don't expect the trustee to increase the distribution to include any significant benefit from such lower taxes. Instead, the benefit will be either insignificant and/or offset by a reserve and my forecast is updated as follows (assuming normal seasonal expenses):

    Distributions: July 2013=$2.20, Oct 2013=$1.73, Jan 2014=$2.39, & Apr 2014=$2.33.
    Avg WTI Price: Q2 2013=$93.09, Q3 2013=$104.22, Q1 2014=$96.99, & Q2 2014=$98.21.
    Avg Production: Q2 2013=82.1K, Q3 2013=58.3K, Q1 2014=85.4K, & Q2 2014=84.8K.

    Regarding CPI and its impact on the allowable costs, I continue to expect a minor inflationary cycle over the next decade followed by cyclical decline, but at rates that lag behind the general rise in WTI.

    For purposes of my forecasts, I continue to exclude all prior period adjustments and any potential benefit from reduced Alaskan taxes as discussed above.

    Since the current present value of future distributions at 6% (instead of the SEC's 10%) is only about $75, the recent price rise has caused me to reduce BPT to a sell, which is not a strong sell only due to the slim chance that all or part of Parnell's tax reduction may survive.

    Sentiment: Sell

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69.07-0.53(-0.76%)Apr 24 4:01 PMEDT