My short is going to sit out this distribution (after losing money on the 1Q). The computers will likely push the unit price to $70 - $75 after the “40% increase” in 2Q distribution (see 2Q 2009 for similar distribution and WTI patterns). Good luck!
Production at Prudhoe Bay was down almost 7% from 1Q. June production was especially bad, down 13% over June 2014. Look for 2Q BPT production to dip under 90,000 bbls/day, which will negatively affect the 2Q dividend payment in July.
Source: Alaska Department of Revenue
Wild’s post is full of misinformation.
1. BP does not own the trust, and therefore cannot sell it.
2. As a “bean counter”, I understand the temptation to understate assets. That is why a geologist is required to value reserves, not a CPA.
3. This trust owns no tangible property, and therefore pays no property tax.
4. The remaining life of the wells has no correlation to the life of the trust. When the royalty to the trust remains under $1 million for two years, the trust will terminate, regardless of how much oil remains in the field.
5. Based on current futures prices, the trust’s final dividend will come in the 1Q of 2021; or a 5 ½ year remaining life.
At trust termination the value of the “royalty interest” is approximately zero since the “adjusted chargeable costs” are part of the interest. The oil remaining in the reservoir does not belong to the trust.