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drilling wells in “the presently proven productive area of an oil
or gas reservoir.” Despite the representation in the Memorandum
that Stonehurst was planning to engage in a developmental
drilling program, there were, as discussed supra, no “proven
productive areas” on the Stonehurst leasehold. Bowers testified
that a 10-percent likelihood of success in exploratory drilling
would be relatively generous under the best of conditions.
Consistent with Bowers’ opinion that the Coburn report was
“disturbingly generic”, was the different typeface used in the
report whenever it referred to Stonehurst. We believe, based
upon Bowers’ evaluation and the record as a whole, that the
Coburn report could not have been relied upon to support the
assumptions in the economic projections. The Coburn report is a
strong indication of the lack of profit motive of the Stonehurst
partnership and its principals. See Hulter v. Commissioner, 91
T.C. at 393; Fox v. Commissioner, 80 T.C. at 1006-1008.
In Osterhout v. Commissioner, supra, we found that the
“promotional valuations pertaining to the prospective oil and gas
production of * * * [the partnerships in issue] were inflated.”
Those inflated valuations were supported by inaccurate geology
reports and world oil price projections that were significantly
inflated in comparison to actual downward market movements
occurring as the leases were entered into in 1981, 1982, and
1983. Id. The economic projections in the Stonehurst Memorandum
were similarly unrealistic. See Krause v. Commissioner, 99 T.C.
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