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Both projections were also based upon a price per barrel of
oil of $32.50 in 1980 that would increase at a compounded annual
rate of 10 percent per year through 1994. The Memorandum
projected that the price of oil in 1994 would be $123.44 per
barrel. Operating costs were also projected to increase at 10
percent per year over the term of the lease.
e. Coburn Geological Report
The Memorandum included a geological report, signed by R. W.
Coburn (hereinafter Coburn report), which identified Mr. Coburn
as a registered Oklahoma petroleum engineer. The Coburn report
asserted that Stonehurst could expect 90 percent of its wells to
produce oil. However, the report does not make clear whether
this likelihood pertained to developmental drilling of known
formations or exploratory drilling in new fields.6 The economic
projections described supra explicitly rested upon the 90-percent
success rate.
The Coburn report asserted that “commercial oil production
can be obtained from the Bartlesville Sand”, which it said was
“the principal producing zone” in Nowata County. The assertion
about obtaining commercial oil production was uncorroborated by
any supporting geological data, such as log data, seismic data,
or gravity surveys. The lack of any such data supporting the
6 One section of the report refers to “shallow oil
exploration” while another section refers to “proposed
development”. This same inconsistency is also found in the
Memorandum. See supra p. 6.
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