BP Prudhoe Bay Royalty Trust BPT - equity, debt and subsidiaries

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BP Prudhoe Bay Royalty Trust  BPT

Summary (from 2016 annual report)

  • Total equity  : 1 million USD
  • Market Cap is 376 million USD ( last price of the stock is 17.60 USD)
  • The BP Prudhoe Bay Royalty Trust is a United States oil and natural gas royalty trust based in New York
  • Company has 1 million USD in cash on account
  • In 2017 total debt is zero (In 2014 total debt was also zero)
  • In latest annual report - total equity was 1 million  USD, total equity was 1 million  USD in 2015, total debt is zero in 2017)
  • Company's revenue decreased in 2016 (latest annual report) to 45 million USD from 127 million in 2015
  • Net income in 2016 was 44 million USD, Net income in 2015 was 125 million USD

Opinion about the company

Fundamentally it is a not bad company but future growth is not certain (Total debt is zero, company has 1 million USD in cash on account, ROE is around 5600%).

BP Prudhoe Bay Royalty Trust

The BP Prudhoe Bay Royalty Trust is a United States oil and natural gas royalty trust based in New York. BP Prudhoe Bay Royalty Trust is the largest conventional oil and gas trust in the United States. Its assets are in the huge Prudhoe Bay Oil Field, the largest oil field in North America, and at the end of 2012 the Trust claimed to have proved reserves of 75.517 million barrels of crude oil. BP Alaska has estimated that the proved reserves allocated to the Trust as of December 31, 2016 were 9.376 million barrels of oil and condensate, of which 9.204 million barrels are proved developed reserves and 0.172 million barrels are proved undeveloped reserves.

BP Prudhoe Bay Royalty Trust (the “Trust”) was created as a Delaware business trust by the BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 (the “Trust Agreement”) among The Standard Oil Company (“Standard Oil”), BP Exploration (Alaska) Inc. (“BP Alaska”), The Bank of New York Mellon (formerly named The Bank of New York), as trustee, and F. James Hutchinson, co-trustee (BNY Mellon Trust of Delaware, formerly named The Bank of New York (Delaware), successor co-trustee). Effective as of December 15, 2010, The Bank of New York Mellon (“BNYM”) resigned as trustee under the Trust Agreement and BP Alaska appointed The Bank of New York Mellon Trust Company, N.A. (the “Trust Company”) to succeed BNYM as trustee. The Trust Company accepted its appointment and assumed all rights, titles, duties, powers and authority formerly held and exercised by BNYM under the Trust Agreement.

Trust Property

The property of the Trust consists of an overriding royalty interest (the “Royalty Interest”) and cash and cash equivalents held by the Trustee from time to time. The Royalty Interest entitles the Trust to a royalty on 16.4246% of the lesser of the first 90,000 barrels of the average actual daily net production of crude oil and condensate per quarter from the working interest of BP Alaska as of February 28, 1989 in the Prudhoe Bay oil field located on the North Slope in Alaska or the average actual daily net production of crude oil and condensate per quarter from that working interest. The Prudhoe Bay field is one of four contiguous North Slope oil fields that are operated by BP Alaska and are known collectively as the “Prudhoe Bay Unit.” The Royalty Interest was conveyed to the Trust by an Overriding Royalty Conveyance dated February 27, 1989 from BP Alaska to Standard Oil and a Trust Conveyance dated February 28, 1989 from Standard Oil to the Trust. The Royalty Interest is a non-operational interest in minerals. The Trust does not have the right to take oil and gas in kind, nor does it have any right to take over operations or to share in any operating decision with respect to BP Alaska’s working interest in the Prudhoe Bay field. BP Alaska is not obligated to continue to operate any well or maintain or attempt to maintain in force any portion of its working interest when, in its reasonable and prudent business judgment, the well or interest ceases to produce or is not capable of producing oil or gas in paying quantities.

The Trust has no employees. All administrative functions of the Trust are performed by the Trustee. The Trustee maintains a $1,000,000 cash reserve to provide liquidity to the Trust during any periods in which the Trust does not receive a distribution from BP Alaska. Since several oil companies besides BP Alaska hold acreage within the Prudhoe Bay field, as well as several contiguous oil fields, the Prudhoe Bay Unit was established to optimize field development. Other owners of these fields include affiliates of Exxon Mobil Corporation, ConocoPhillips and Chevron Corporation. The Trust’s Royalty Interest pertains only to production from the 1989 Working Interests in the Prudhoe Bay field and does not include production from the other oil fields included in the Prudhoe Bay Unit.

  • The Trust’s share of oil production and condensate is computed based on BP Alaska’s ownership interest in the oil rim participating area of 50.68% as of February 28, 1989. Subsequent decreases in BP Alaska’s participation in oil rim ownership do not affect calculation of Royalty Production from the 1989 Working Interests and have not decreased the Trust’s Royalty Interest.
  • The Trust’s share of condensate production is computed based on BP Alaska’s ownership interest in the gas cap participating area of 13.84% as of February 28, 1989. Subsequent increases in BP Alaska’s gas cap ownership do not affect calculation of Royalty Production from the 1989 Working Interests and have not increased the Trust’s Royalty Interest.

Reserve Estimates

Oil and condensate are physically produced in a commingled stream of hydrocarbon liquids. The estimated reserve volumes attributable to the Trust will vary if different estimates of production, prices and other factors are used. Even if expected reservoir performance does not change, the estimated reserves, economic life, and future revenues attributable to the Trust may change significantly in the future. This may result from changes in the WTI Price or from changes in other prescribed variables utilized in calculations defined by the Overriding Royalty Conveyance.

  • BP Alaska has estimated that the proved reserves allocated to the Trust as of December 31, 2016 were 9.376 million barrels of oil and condensate, of which 9.204 million barrels are proved developed reserves and 0.172 million barrels are proved undeveloped reserves. Proved reserves attributable to the Trust were reduced by approximately 13.676 million barrels during 2016 as a result of the significant reduction in the West Texas Intermediate price, forecast revisions and capital activities including drilling and well treatments.
  • BP Alaska calculated that as of December 31, 2016 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 $63.824 million, with a net present value of estimated future cash flows at 10% discount of $59.186 million.
  • BP Alaska’s net production of oil and condensate allocated to the Trust from proved reserves was less than 90,000 barrels per day on an annual basis in 2014, 2015 and 2016. BP Alaska anticipates that its average net production of oil and condensate allocated to the Trust from proved reserves will be below 90,000 barrels per day on an annual average basis most future years.
  • Based on the 2016 twelve-month average WTI Price of $42.75 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 2018, 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. Even if expected reservoir performance does not change, the estimated reserves, economic life and future net revenues attributable to the Trust may change significantly in the future ( from annual report 10 K).

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