A Prudent Investor
Value, growth, long/short equity, contrarian

BP Prudhoe Bay Royalty Trust: What Is BPT's Fair Value?

I have been following the chatter about BP Prudhoe Bay Royalty Trust (BPT) for over a year now and have read many of the articles written negatively about BPT. The naysayers are focusing on depleting reserves, production charges escalation, and pipeline disruptions. These are known risks and these risks needs to be evaluated and not ignored. The question is at what price you take on risk and what the anticipated return for that risk is. A recent short seller's analysis of BPT's present value of $33 per share is absurd and is materially miscalculated in every respect. For comparison purposes, BPT held to termination can be viewed as a financial instrument that resembles a mortgage that amortizes itself...

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