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BP Prudhoe Bay Royalty Trust Message Board

  • roundrobinjack roundrobinjack Jul 9, 2013 12:14 PM Flag

    Distribution Forecast Issues and Implications, Pt. 1

    While the July distribution came in close to my updated data computation, there are serious potential issues concerning future distributions. Here are my observations:
    1. Under the methodology I've explained in the past, the final computation of the July distribution projected a rounded amount of $2.1384 vs an actual 2.1429. The variance or 0.21% was back positive after the 2 negative quarters that followed October's massive positive one:
    Jul 13: Calc=2.1384 vs Act=2.1429
    Apr 13: Calc=2.4183 vs Act=2.4148
    Jan 13: Calc=2.3444 vs Act=2.3152
    Oct 12: Calc=1.6813 vs Act=1.8216
    Jul 12: Calc=2.3086 vs Act=2.3129
    Apr 12: Calc=2.6307 vs Act=2.6431
    Jan 12: Calc=2.4893 vs Act=2.5161
    Oct 11: Calc=1.9344 vs Act=1.9565
    Jul 11: Calc=2.6289 vs Act=2.6391
    Apr 11: Calc=2.3973 vs Act=2.3933
    Jan 11: Calc=2.3913 vs Act=2.4080
    2. It should be noted that the calculated values use actual daily production P/L receipts from the AK Tax Div whereas BP uses estimates of final quarter production. IMO the bias toward positive variances (8 of 11) is probably due to prior period adjustment for conservatism in those estimates. Such conservatism has significant implication for how future distributions will (or won't) take into account any benefit from the recent repeal of the main progressive tax rate provision enacted under Palin's admin. Whether or not one agrees with me in that I expect the repeal to be overturned, it seems certain that the BPT trustee will hold back on increasing the distribution to the extent of such benefit at least until and unless it is upheld in the 2014 elections (and possibly the subsequent legislative session). Therefore, my estimates of upcoming distribution include no such benefit (nor prior period adjustments):
    Oct 13=1.762* Jan 14=2.394 Apr 14=2.335 Jul 14=2.092
    [* Pending meaningful production data, assumes a 25% production reduction due to normal M&R.

    Sentiment: Strong Sell

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