BP Prudhoe Bay Royalty Trust
Encyclopedia
The BP Prudhoe Bay Royalty Trust is a United States oil and natural gas
royalty trust
based in New York, New York. With a market capitalization of US$ 1.6 billion in early 2008, and an average trading volume of 121,000 shares, 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 2006 the Trust claimed to have proved reserves of 85.1 million barrels of crude oil.
Standard Oil Company and BP Exploration, both now branches of British Petroleum
, set up the trust in 1989. They distribute royalties on a portion of the oil produced from the Prudhoe Bay Oil Field, typically 16% of the first 90,000 barrels of net daily production. In their 2006 Annual Report, the Trust estimated it would continue to make royalty payouts through at least the year 2024.
Royalty trusts typically pay enormous dividends by Wall Street standards, making them popular with investors, particularly during times when the price of oil is high, or other market sectors are performing poorly. Investing advice firm Motley Fool
listed the trust in the top four dividend payers of the decade from 1997 to 2007, giving a total return on investment during that time of 1,369%. In early 2008, the Trust's quarterly dividend per share was $3.05, which equated to an annual payout of approximately 16%. It pays its dividend quarterly, unlike many of the royalty trusts, which pay monthly. Unanticipated oilfield mishaps can occasionally cause volatility of the stock price, as happened in August 2006, when BP needed to shut down its operations at Prudhoe Bay to replace 22 miles (35.4 km) of corroded lines. The Prudhoe Bay oil field has been developed for 30 years, but its original pipelines were designed to last for only 25 years.
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
royalty trust
Royalty trust
A royalty trust is a type of corporation, mostly in the United States or Canada, usually involved in oil and gas production or mining. However, unlike most corporations, its profits are not taxed at the corporate level provided a certain high percentage of profits are distributed to shareholders...
based in New York, New York. With a market capitalization of US$ 1.6 billion in early 2008, and an average trading volume of 121,000 shares, 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
Prudhoe Bay oil field
Prudhoe Bay Oil Field is a large oil field on Alaska's North Slope. It is the largest oil field in both the United States and in North America, covering and originally containing approximately of oil.. BP. August 2006...
, the largest oil field in North America, and at the end of 2006 the Trust claimed to have proved reserves of 85.1 million barrels of crude oil.
Standard Oil Company and BP Exploration, both now branches of British Petroleum
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
, set up the trust in 1989. They distribute royalties on a portion of the oil produced from the Prudhoe Bay Oil Field, typically 16% of the first 90,000 barrels of net daily production. In their 2006 Annual Report, the Trust estimated it would continue to make royalty payouts through at least the year 2024.
Royalty trusts typically pay enormous dividends by Wall Street standards, making them popular with investors, particularly during times when the price of oil is high, or other market sectors are performing poorly. Investing advice firm Motley Fool
Motley Fool
The Motley Fool is a multimedia financial-services company that provides financial solutions for investors through various stock, investing, and personal finance products. The Alexandria, Virginia-based private company was founded in July 1993 by co-chairmen and brothers David and Tom Gardner, and...
listed the trust in the top four dividend payers of the decade from 1997 to 2007, giving a total return on investment during that time of 1,369%. In early 2008, the Trust's quarterly dividend per share was $3.05, which equated to an annual payout of approximately 16%. It pays its dividend quarterly, unlike many of the royalty trusts, which pay monthly. Unanticipated oilfield mishaps can occasionally cause volatility of the stock price, as happened in August 2006, when BP needed to shut down its operations at Prudhoe Bay to replace 22 miles (35.4 km) of corroded lines. The Prudhoe Bay oil field has been developed for 30 years, but its original pipelines were designed to last for only 25 years.