Reading the SEC filing, i would agree that extended ppb of less then 10 dollars would create a problem with the dividend. They did pay as recently as Oct 20, 1998. No announcements from the company, yet, warning that they will not pay.
With oil prices so low, i think the stock remains a long term buy and hold here; the book value, the dividend and the price per share all look enticing.
From the SEC filing on the dividend payment calculation:
Upon creation of the Trust, the Company conveyed to Standard Oil, and
Standard Oil, in turn, conveyed to the Trust an overriding royalty interest
(the "Royalty Interest"), which entitles the Trust to a royalty on 16.4246
percent of the first 90,000 barrels of the average actual daily net production
of oil and condensate per quarter from the working interest of the Company as
of February 28, 1989 in the Prudhoe Bay Unit located on the North Slope in
Alaska. The Royalty Interest is free of any exploration and development
expenditures.
THE ROYALTY INTEREST
The Royalty Interest is a property right under Alaska law which burdens
production, but there is no other security interest in the reserves or
production revenues to which the Royalty Interest is entitled. The royalty
payable to the Trust under the Royalty Interest for each calendar quarter is
the sum of the product of (i) the Royalty Production and (ii) the Per Barrel
Royalty for each day in the quarter. The payment under the Royalty Interest
for any calendar quarter may not be less than zero nor more than the aggregate
value of the total production of oil and condensate from the Company's working
interest in the Prudhoe Bay Unit for such calendar quarter, net of the State
of Alaska royalty and less the value of any applicable payments made to
affiliates of the Company.
Royalty Production
The "Royalty Production" for each day in a calendar quarter is 16.4246
percent of the first 90,000 barrels of the actual average daily net production
of oil and condensate for such quarter from the Prudhoe Bay (Permo-Triassic)
Reservoir and allocated to the oil and gas leases owned by the Company in the
Prudhoe Bay Unit as of February 28, 1989 or as modified thereafter by any
redetermination provided under the terms of the Prudhoe Bay Unit Operating
Agreement and the Prudhoe Bay Unit Agreement (the "Subject Leases"). The
Royalty Production is based on oil produced from the oil rim and condensate
produced from the gas cap, but not on gas production or natural gas liquids
production. The actual average daily net production of oil and condensate
from the Subject Leases for any calendar quarter is the total production of
oil and condensate for such quarter, net of the State of Alaska royalty,
divided by the number of days in such quarter.
Per Barrel Royalty
The "Per Barrel Royalty" in effect for any day is an amount equal to the
WTI Price for such day less the sum of (i) the product of the Chargeable Costs
multiplied by the Cost Adjustment Factor and (ii) Production Taxes.
WTI Price
The "WTI Price" for any trading day means (i) the latest price (expressed
in dollars per barrel) for West Texas intermediate crude oil of standard
quality having a specific gravity of 40 degrees API for delivery at Cushing,
Oklahoma ("West Texas Crude"), quoted for such trading day by the Dow Jones
International Petroleum Report (which is published in The Wall Street Journal)
or if the Dow Jones International Petroleum Report does not publish such
quotes, then such price as quoted by Reuters, or if Reuters does not publish
such quotes, then such price as quoted in Platt's Oilgram Price Report, or
(ii) if for any reason such publications do not publish the price of West
Texas Crude, then the WTI Price will mean, until the price quotations
described in (i) are again available, the simple average of the daily mean
prices (expressed in dollars per barrel) quoted for West Texas Crude by one
major oil company, one petroleum broker and one petroleum trading company, in
each case unaffiliated with BP and having substantial U.S. operations. Such
major oil company, petroleum broker and petroleum trading company will be
designated by the Company from time to time. In the event that prices for
West Texas Crude are not quoted so as to permit the calculation of the WTI
Price, "West Texas Crude," for the purposes of calculating the WTI Price will
mean such other light sweet domestic crude oil of standard quality as is
designated by the Company and approved by the Trustee in the exercise of its
reasonable judgment, with appropriate allowance for transportation costs to
the Gulf Coast (or other appropriate location) to equilibrate such price to
the WTI Price. The WTI Price for any day which is not a trading day is the
WTI Price for the next preceding trading day.
Chargeable Costs
The "Chargeable Costs" per barrel of Royalty Production for each calendar
year are fixed amounts specified in the Conveyance and do not necessarily
represent the Company's actual costs of production. Chargeable Costs per
barrel for the five calendar years ended December 31, 1996 were: $6.00 during
1992; $6.75 during 1993; $8.00 during 1994; $8.25 during 1995; and $8.50
during 1996. Chargeable Costs for the calendar year ending December 31, 1997
and subsequent years are shown in the following table:
For the Chargeable For the Chargeable
Year Ending Costs Per Year Ending Costs Per
December 31 Barrel December 31 Barrel
------------ ---------- ------------ ----------
1997 $ 8.85 2009 $13.25
1998 9.30 2010 14.50
1999 9.80 2011 16.60
2000 10.00 2012 16.70
2001 10.75 2013 16.80
2002 11.25 2014 16.90
2003 11.75 2015 17.00
2004 12.00 2016 17.10
2005 12.25 2017 17.20
2006 12.50 2018 20.00
2007 12.75 2019 23.75
2008 13.00 2020 26.50
After 2020, Chargeable Costs increase at a uniform rate of $2.75 per
year.
Chargeable Costs may be reduced in future years by up to $1.20 per barrel
in the following circumstances:
(1) Chargeable Costs will be reduced by up to $1.20 per barrel in each
year from 2001 through 2005, inclusive, if, between January 1, 1996 and
December 31, 2000, an additional 200,000,000 stock tank barrels ("STB") of
proved reserves (before taking into account any production therefrom) have not
been added to the proved reserves allocated to the Subject Leases. For the
purpose of this calculation, additions to proved reserves include a credit
equal to the number of STB of proved reserves in excess of 100,000,000 added
to proved reserves after December 31, 1987 and before January 1, 1996.
(2) Chargeable Costs will be reduced by up to $ 1.20 per barrel in 2006
and subsequent years if, between January 1, 2001 and December 31, 2005, either
(a) an additional 400,000,000 STB of proved reserves (before taking into
account any production therefrom) have not been added to proved reserves
allocated to the Subject Leases (including, for the purpose of this
calculation, a credit equal to the number of STB of proved reserves in excess
of 300,000,000 added to the Company's reserves after December 31, 1987 and
before January 1, 2001), or (b) an additional 100,000,000 STB of proved
reserves (before taking into account any production therefrom) have not been
added to the reserves allocated to the Subject Leases, without allowing any
credit for additions prior to January 1, 2001. In general, "proved reserves"
for purposes of this determination consist of the Company's estimate
(determined to be reasonable by independent petroleum engineers) of the
quantities of crude oil and condensate that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years under
existing economic and operating conditions from the Prudhoe Bay (Permo-
Triassic Reservoir) in the Prudhoe Bay Unit. See "THE PRUDHOE BAY UNIT -
Reserve Estimates" below. |
