3. As in prior postings, I have also computed a long-term forecast of distributions assuming a gradual restoration of trends toward inflation rates of 6% for WTI,and 3.3% CPI after a price spiral to above 7% and back down over the next 15 years. Such assumptions give BPT a life of several decades (unlike SEC assumptions), which I expect will make a fair-market buyout highly likely in about 20-30 years (long before it actually become worthless). Instead of the SEC's unrealistic 10% rate, I use 6% rate to compute a present value of future distributions, and have assumed any buyout would reflect a similar valuation.:
PV @ 6% = $75.82
4. In as much as the market price of BPT is more than $20 more than the PV, I view BPT as massively overvalued. BUT THIS PRIMARILY DUE TO MY VIEW OF NO BENEFIT FROM THE AK TAX REPEAL. If somehow the tax repeal stands, it would make BPT roughly fairly valued if it also results in development of the other levels of known deposits to which BPT also has royalty rights, besides the main deposit level that was the only level initially developed. But even then, I am concerned this leaves little if any allowance for potential spills or other interruptions to production (which have been and will be experienced as the equipment, etc. gets older and older). Accordingly BPT is a strong sell for anyone wiling to take the tax consequences of selling--otherwise use options (my strategy) to protect against possible price declines.
Sentiment: Strong Sell
My father in law before he does loved high yield stocks. I got him in this at 13 he collected dividends and sold at 33. That has been a long time ago maybe 7-8 years at least. Long story short he had 1k shares I used to give him he'll about all the dividends he missed as well as the price appreciation. I help my mother in law manage her investments now and I got her in at 70. She reinvests the divies so it is climbing quickly in number of shares (she is in for 500). Aside from price increase I would say he lost for a few years 10k in dividends a uear
Jack, I'm one of your most ardent admirer. Your posts are mostly supported by reliable data and your assumptions warrants attention. Looking forward on your every post and be careful on your options. I see a window of volatility for BPT now to late 2014. Good luck.
With the AK tax repeal law and COP, BP et al subsequent expression of "development" which might be completed on or before 2016 and with the 'fracturing' technology, it is my belief that the north slope production volume will be revived, possibly, doubling- tripling the current production. The current worldwide oil demand is still increasing and with OPEC's price target of $100/barrel in place, BPT is not overvalued by a long shot.
By 2016 we will have 3 catalyst to propel BPT to a new high: Production volume, price per barrel, life expectancy to 30-40 years of the trust. Consequently dividend of $3.00 per quarter is highly achievable and the current stock price that you call overvalued could climb to a new high.
Sentiment: Strong Buy
I've bought and sold this stock many times over the years. If I'd just bought and held in the beginning I'd be sitting on a yacht drinking champagne. Every time I sell I regret it. So I will hold on and see if what you say comes to be.
"Accordingly BPT is a strong sell for anyone wiling to take the tax consequences of selling--otherwise use options (my strategy) to protect against possible price declines."
Sentiment: Strong Sell
RRJack: But isn't this at least a part of the sentiment (strong sell) that hit BPT back in August 17th thru the 29th? When it dropped sharply from $120 to less than $77? And now, here it is, July 10th, running back at just under $100... BPT sports one of my strongest ROI's, at just under 20% compounded annually for almost seven years... makes it really hard here to pull the plug just yet...
I know that I'll 'likely' give some back, but right now I think I'll keep riding the BPT horse... and thanks for all the great input on the issues of the trust...
Thanks for the update on this Jack. Too much of my portfolio is tied up in this issue (along with PBT & SBR) to consider getting rid of it anytime soon. My other holdings have too much exposure to NG and the glut is really depressing the share prices along with their divvies. Despite my bemoaning about the lower than expected payout though, I don't know where I'd be right now if it wasn't for BPT. It's holding up my entire portfolio, but I'm also beginning to feel trapped by it, I can't get out from underneath it without bringing disaster down on me.