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BP Prudhoe Bay Royalty Trust Message Board

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  • diogenes1234 diogenes1234 Sep 25, 2000 12:38 AM Flag

    diogenes please reply

    wolfie: You are missing two things:

    Cash payments are not equal over the life of the
    trust. Your scenario would result in substantial front
    end loading. Best case, were you to get $13.50 back
    the first year and $3.00 over the remaing life, the
    return would be a fantastic.

    2) BPT units
    actually have two elements of value, future cash payments,
    as discussed; and also an option on the price of WTI
    based on the possibility of extraordinary price
    appreciation. The latter is virtually irrelevant today in my
    opinion, but was the sole value of Trust units recently
    when WTI was hovering at $10, on its way to $5 in the
    minds of many experts. BPT was then selling below $5
    with no cash payments.

    To understand option
    pricing, we could go off into a discussion of
    Black-Scholes, suffice it to say these gentlemen won a Nobel
    Prize for their contribution to modern

    In all seriousness, if anyone finds this puzzling
    they might give serious thought to Exxon or the like.
    You'll still be subject to the vagaries of future oil
    prices, but in a vehicle managed by humans who can react
    to future change which is not the case with BPT.

17.30+2.03(+13.29%)Jun 28 4:02 PMEDT