NEW YORK, March 9, 2016 /PRNewswire/ -- CAS Investment Partners ("CAS") would like to make investors aware of new language that The Bank of New York Mellon Trust Company (the "Trustee") has included in the latest Form 10-K filing for BP Prudhoe Bay Royalty Trust ("BPT" or the "Trust") (NYSE: BPT) with the Securities and Exchange Commission. CAS believes that the following new language from BPT's Form 10-K is an acknowledgement that BPT's royalty and income oriented investors bear significant risk:
"Based on the 2015 twelve-month average WTI Price of $50.28 per barrel, current Production Taxes, and the Chargeable Costs adjusted as prescribed by the Overriding Royalty Conveyance, it is estimated that royalty payments to the Trust will continue through the year 2020, and would be zero in the following year. Therefore, no proved reserves are currently attributed to the BP Prudhoe Bay Royalty Trust after that date." [i]
Based on its analysis, CAS has concluded that the only material asset that BPT holds is a royalty interest (RI) in the BP Prudhoe Bay Field. The RI entitles BPT to receive a royalty on up to 90,000 barrels of production per day, with the price set by WTI (West Texas Intermediate) and a cost that is set by a previously negotiated cost adjustment factor which rises every year going forward and is also multiplied by the consumer price index (CPI). Due to these contractually rising costs, CAS has calculated that oil prices must continually rise in order for BPT to maintain its current royalty payout to investors.
BPT's last royalty distribution (payable January 20, 2016) was $0.60188891 per unit. Therefore, CAS calculates that even if royalties remain flat, the total paid out to holders by 2020 would be $12.04 per share. BPT's closing price yesterday was [$29.76.]
Additionally, as disclosed in the 10-K filing, "BP Alaska calculated that as of December 31, 2015 production of oil and condensate from the proved reserves allocated to the 1989 Working Interests will result in undiscounted estimated future cash flow to the Trust of $248.1 million" [i]
Given that there are 21.4 million shares, CAS calculates that BP Alaska's estimate of BPT's undiscounted future cash flow to be $11.59 per share. BPT's closing price yesterday was [$29.76]
CAS has purchased put options expiring [March 18] on BPT and expects to profit off a fall in stock price.
CAS encourages investors to contact the Trustee [ii] and BP [iii] (BPTs parent company) for guidance on the value of their shares.
Forward Looking Statements
This press release contains "forward-looking statements." Generally, the words "anticipate," "believe," "estimate," "expect," "intend," "may," "predict," "project," "plan," and similar expressions identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statement. Consequently, no reliance should be placed on any forward-looking statements contained herein and the reader should consider any such forward-looking statements only as CAS's current beliefs as of the date of this press release. Even if these beliefs change because of future events or circumstances, CAS declines any obligation to publicly update or revise any such forward-looking statements.
[i] BPT 10-K p.26, 17 http://www.sec.gov/Archives/edgar/data/850033/000119312516484604/d102077d10k.htm
[ii] Bank of New York Mellon Trust Company (713) 483-6020
[iii] BP P.L.C. 44 20 7496-4000
CAS Investment Partners is a member of the Financial Industry Regulatory Authority, CRD number 170071.
SOURCE CAS Investment Partners