If You Invested in Bp Prudhoe Bay Rty Tr (BPT)

BP Prudhoe Bay Royalty Trust (former NYSE: BPT) is a royalty trust that has historically provided unitholders with an interest in revenues derived from a defined oil and gas royalty interest. According to recent public disclosures, the trust has terminated in accordance with its governing Trust Agreement and is in the process of winding up its affairs. Trading of its units on the New York Stock Exchange has been suspended, and quotation of the units has moved to the OTC Pink market under a different symbol.

The trust structure is governed by a Trust Agreement under which a quarterly royalty payment is calculated and, when positive, passed through to unitholders. The quarterly royalty payment from Hilcorp North Slope, LLC ("HNS") to the trust is defined as the sum of the individual revenues attributed to the trust as calculated each day during the quarter. For each day, revenue is determined by multiplying Royalty Production for that day by the Per Barrel Royalty for that day.

The Per Barrel Royalty for any day is described in the Trust Agreement as the WTI Price for that day less the sum of (i) Chargeable Costs multiplied by the Cost Adjustment Factor and (ii) Production Taxes. If this calculation produces a negative value, the Trust Agreement provides that the payment with respect to the royalty interest for any calendar quarter may not be less than zero. As a result, when the calculated Per Barrel Royalty is negative, no royalty payment is made for that quarter and no cash distribution is paid to unitholders.

Public announcements for multiple quarters, including quarters in 2023, 2024, and 2025, state that the average daily closing WTI price for those periods was below the "break-even" price implied by adjusted chargeable costs and production taxes. In each of those quarters, the average Per Barrel Royalty was negative, so the trust reported that no royalty payment was received and the dividend rate per unit was zero. These disclosures illustrate how the trust’s economics are tied to the relationship between WTI prices, adjusted chargeable costs, and production taxes.

Under the terms of the Trust Agreement, the termination trigger occurs when net revenues from the royalty interest for two successive years are less than a specified threshold amount. The trust has disclosed that it did not receive any revenues attributable to any of the four quarters of each of 2023 and 2024. In accordance with the Trust Agreement, the trust therefore terminated at 11:59 PM on December 31, 2024, and The Bank of New York Mellon Trust Company, N.A., as trustee, has commenced the process of winding up the affairs of the trust.

Following termination, the Trust Agreement generally requires the trustee to sell for cash all of the trust assets other than cash. As soon as practical after termination, the trustee is required to obtain a third-party opinion as to the fair market value of the trust assets on the termination date. Hilcorp North Slope, LLC has an option, exercisable within 30 days of notice of that valuation, to purchase the trust assets at a price equal to the greater of (i) the fair market value set forth in the opinion or (ii) a fixed dollar amount derived from the number of outstanding units multiplied by the NYSE closing price on the termination date.

The trustee has disclosed that it engaged RedOaks Energy Advisors, LLC to provide the required fair market value opinion and to assist with marketing and sale of the trust’s assets. The opinion reflected a de minimis valuation for the trust assets as of the termination date for purposes of determining the option value under the Trust Agreement. Hilcorp North Slope, LLC subsequently informed the trustee that it declined to exercise its option to purchase the trust assets.

Because the option was not exercised, the Trust Agreement requires the trustee to proceed with a sale process for the trust assets. The sale is to be conducted on terms and conditions approved by holders of a specified percentage of the outstanding units, unless the trustee determines that it is not practicable to submit the matter to a unitholder vote and the sale is made at a price at least equal to the fair market value set forth in the third-party opinion and on terms deemed commercially reasonable by that third party. The trustee has announced that RedOaks is conducting a bidding process for potential purchasers of the royalty interest.

After any sale of the trust assets, the trustee is obligated under the Trust Agreement to distribute the available net proceeds to unitholders, after satisfying all liabilities of the trust (including expenses) and establishing or increasing reserves for contingent liabilities. Public disclosures emphasize that the trustee cannot predict whether there will be bidders for the trust assets, the amount of proceeds, if any, that may result from a sale, or when the wind-up of the trust will be completed. There is also no assurance that unitholders will realize any proceeds from a sale of the trust assets.

In connection with its trading status, the trust has reported that it received written notification from the New York Stock Exchange (NYSE) that the average closing price of its units fell below $1.00 over a 30 consecutive trading-day period, which is below the continued listing compliance standards under NYSE Rule 802.01C. The trust was unable to regain compliance within the specified cure period. As a result, the NYSE suspended trading of the units at the close of trading on June 30, 2025 and initiated proceedings to delist the units.

Following the NYSE suspension, the trust has disclosed that its units began trading on July 1, 2025 under the symbol BPPTU on the Pink Limited Market (OTC Pink), operated by OTC Markets Group, Inc. The trust has noted that OTC Pink is a significantly more limited market than the NYSE, and that quotation on this venue may result in a less liquid market for existing and potential unitholders and could further depress the trading price of the units. The trust has also cautioned that there is no assurance that an active market in the units will develop or persist on OTC Pink.

Unitholders do not have the right under the Trust Agreement to seek or secure any partition or distribution of the royalty interest or other trust assets, or to demand an accounting during the term of the trust or during any period of liquidation and winding up. Instead, unitholders participate indirectly through the trustee’s administration of the trust, periodic public disclosures, and eventual distribution of net proceeds, if any, after the sale of trust assets and satisfaction of liabilities.

Because the trust has terminated and is in the process of liquidation, BPT functions as a historical ticker for BP Prudhoe Bay Royalty Trust’s units on the NYSE. Current quotation of the units has moved to the OTC Pink market under a different symbol, and the trust’s remaining activities relate to winding up, asset sale, and distribution of any net proceeds in accordance with the Trust Agreement.