From BP's perspective, creating the trust and paying out based on WTI
makes sense under two conditions: 1) raising capital this way costs
less than from captial markets, equity, etc. 2) WTI spot prices are
expected to decline, resulting in declining payments to the trust. I
don't know what the initial unit price was for the trust, but there
must have been some calculation of the cost to raise capital (remember
interest rates in the 80s were sky-high) and creating the trust must
have been cost-effective or BP wouldn't have done it.

A decline in spot prices would be offset by hedging their sell price
for the oil produced, allowing them a steady revenue stream while
paying less to the trust. I think the recent run in WTI was a great
windfall for unitholders, but horrible for BP.

The trust only gets 16% or so of the WTI, minus chargeables, so BP is
still getting plenty of cash out of the production. I would guess that
they hedge the price rather than selling on the open market - anyone
have any info on that?

On May 12, 6:25 am, frank1...@gmail.com wrote:

Simple evidence supporting a stock price in the range of $25-$30 per
share.

*At today's price of $69 per share, to earn a 10% rate of return
holding the security to maturity (presumably December 31, 2020), you
would have to earn a constant quarterly dividend of $2.48 per share
for the next 11.75 years (totaling $116.3 in dividends).  By
comparison, since the first dividend was paid on July 11, 1989 through
March 31, 2009 this security has paid in total $74.3 in dividends per
share -- a time period of 19.75 years.

*The average dividend over the last 19.75 years was $0.93/share.

*In only 4 quarters (December 31, 2007 through September 30, 2008) out
of the last 79 has this security  paid a dividend above $2.48 during
which time the price of oil was on its way up to $140/barrel.

*To summarize, one would have to earn 56% more dividends in the next
11.75 years than what were paid cumulatively during the past 19.75
years.

*If you were to buy this security today at $69/share, to just recover
your capital you would have to earn $69 in cumulative dividends if you
held this investment to maturity -- I hope the folks that own this
security understand that this security is not a bond -- there is no
repayment of principal.

*Hypothetically, if you earned the average dividend paid over the last
19.75 years ($0.93/share) until the security stops paying dividends in
2020, in order to earn a 10% rate of return holding to maturity you
would have to have bought this security at a price of $25 per share.

If you have any questions/comments or would care to see the excel file
I have prepared with these facts, feel free to drop me an email at
livermor...@gmail.com

For this particular security's risk profile, I believe at a minimum no
investor should accept less than a 10% IRR (annual rate of return) --
everyone on this message board seems to already understand the risk
profile so I am not going to belabor the various points (taxation,
conflicts of interest, etc.).

Simple evidence supporting a stock price in the range of $25-$30 per
share.

*At today's price of $69 per share, to earn a 10% rate of return
holding the security to maturity (presumably December 31, 2020), you
would have to earn a constant quarterly dividend of $2.48 per share
for the next 11.75 years (totaling $116.3 in dividends).  By
comparison, since the first dividend was paid on July 11, 1989 through
March 31, 2009 this security has paid in total $74.3 in dividends per
share -- a time period of 19.75 years.

*The average dividend over the last 19.75 years was $0.93/share.

*In only 4 quarters (December 31, 2007 through September 30, 2008) out
of the last 79 has this security  paid a dividend above $2.48 during
which time the price of oil was on its way up to $140/barrel.

*To summarize, one would have to earn 56% more dividends in the next
11.75 years than what were paid cumulatively during the past 19.75
years.

*If you were to buy this security today at $69/share, to just recover
your capital you would have to earn $69 in cumulative dividends if you
held this investment to maturity -- I hope the folks that own this
security understand that this security is not a bond -- there is no
repayment of principal.

*Hypothetically, if you earned the average dividend paid over the last
19.75 years ($0.93/share) until the security stops paying dividends in
2020, in order to earn a 10% rate of return holding to maturity you
would have to have bought this security at a price of $25 per share.

If you have any questions/comments or would like care to see the excel
file I have prepared with these facts, feel free to drop me an email
at livermor...@gmail.com

Simple evidence supporting a stock price in the range of $25-$30 per
share.

*At today's price of $69 per share, to earn a 10% rate of return
holding the security to maturity (presumably December 31, 2020), you
would have to earn a constant quarterly dividend of $2.48 per share
for the next 11.75 years (totaling $116.3 in dividends).  By
comparison, since the first dividend was paid on July 11, 1989 through
March 31, 2009 this security has paid in total $74.3 in dividends per
share -- a time period of 19.75 years.

*The average dividend over the last 19.75 years was $0.93/share.

*In only 4 quarters (December 31, 2007 through September 30, 2008) out
of the last 79 has this security  paid a dividend above $2.48 during
which time the price of oil was on its way up to $140/barrel.

*To summarize, one would have to earn 56% more dividends in the next
11.75 years than what were paid cumulatively during the past 19.75
years.

*If you were to buy this security today at $69/share, to just recover
your capital you would have to earn $69 in cumulative dividends if you
held this investment to maturity -- I hope the folks that own this
security understand that this security is not a bond -- there is no
repayment of principal.

*Hypothetically, if you earned the average dividend paid over the last
19.75 years ($0.93/share) until the security stops paying dividends in
2020, in order to earn a 10% rate of return holding to maturity you
would have to have bought this security at a price of $25 per share.

If you have any questions/comments or would like care to see the excel
file I have prepared with these facts, feel free to drop me an email
at livermor...@gmail.com

On May 11, 10:09 am, steve.isak...@gmail.com wrote: