Let me get this straight: cash strapped BP is selling BPT to Apache for costs related to their oil spill well ahead of the market premium? Usually large sum transactions go for less than the market premium.....but, if you'd prefer to test your theory of $120, then go right ahead and wait for your 30 year old oil field with 10% anual declines in production to get to $120/share.
One way to forecast the worth of a company is the future earnings. Assuming a 5 years projection. what can the barrel of crude be worth.
The consensus is that world oil production has picked. If not in volume the prospects are that new production will be many times more costly then what is in production today. From an American point of view, without the GOM 10% oil production, the spot market with go up, the US will not do without oil at this time. Is $120 or $150 possible? My belief is that all existing O&G production cost will go up because of the GOM spill. I cannot see oil price at $80 in 12 month. At minimum $100 and probably $120 average with pick prices at $150 or more.
I do not know the amount of Prudhoe Bay production is on long term contract. But with the price going up, PBT will benefit as the 90 000 barrels will generate more revenues. The market tend to be 6 month ahead of the economy. Those numbers make senses!
It's been cited before on this board, but perhaps a useful link to bookmark would help folks who still do not understand:
BP Prudhoe Bay Royalty Trust: Royalty Generator Extraordinaire
I wonder if some of the readers of this MB, understand English or are just "Stupid". In my previous post, the company is Prudhoe Bay Production which is a consortium with BP, Conoco/Philips etc. This Prudhoe Bay Production is NOT BPT.
Now, how will BPT benefit from the inclusion of Apache or buy out of BP 26% by Apache. New company, new reservoir management and production philosophy that could see a production increase. Any extended production is a plus for the Royalty paid to BPT that is in kind, which is the first 90 000 BPD, NOT MONEY. The forecast, in my opinion, is that the price of oil will go up, $100 or more soon. One of the reason is the BP spill in the GOM. It does not take a doctorate degree to understand that the loss of 10.5% O&G production in the US (GOM) will have to be purchased from the spot market. The spot market is to the highest bidder.
Higher price of oil means that the 90 000 BPD royalty to BPT will generate a higher income. The unknown is the amount of oil on long term contract(s) the "Prudhoe Bay production consortium" has NOT BPT. Hence the long term contracts have negotiated prices, probably, but not certain, lower than today's market price.
I guess some readers have their head, not in the right place, right Lisahuang54?
Do you not understand that this is a trust, not a stock?
I'll answer that:
I think it's 'obvious'. There're 'tons' of folks forking out money in the market that have but a scant knowledge of the scheme. I guess they're a part of what 'makes the market'.
The buyout is a win win. If BPT gets bought out then the price goes up. When Apache takes over the oil field they usually get more oil from the same well.
If nothing happens we still get the dividend from BPT.
I like it when a plan comes together.
"If BPT gets bought out then the price goes up."
There is no reason for the price to go up.
If the company operating the fields covered by the trust changes, the amount of money which goes to the trust unitholders does not change.
You are still confusing this trust with a corporation.