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course, subject to refund until the appeals of FERC Order 451
became final.
2. Acquisition Strategy and Efforts Before the
Acquisition
a. Publicly Announced Acquisition Policy
During 1986, petitioner's gas reserves were projected to
last for approximately 25 years. Oil and natural gas reserves
are, however, by their very nature depleting assets. Because oil
and natural gas reserves are nonregenerative, they must be
replaced either through exploration and development or by
acquisition. Petitioner's board and management team elected,
from the outset, to replace production and add reserves through
acquisition. In petitioner's 1985 third quarter report, Mr.
Jackson wrote a letter to the shareholders announcing
petitioner's acquisition plans as follows:
Although the decrease in oil and gas prices has not
significantly affected your Company's earnings, it has
affected the industry in general. Plains sees the drop in
other companies' values as a strategic opportunity to make a
profitable acquisition that will expand its size and area of
operations. [Emphasis added.]
Similarly, in petitioner's first annual report, issued for the
year ended December 31, 1985, Mr. Jackson again publicly
announced petitioner's acquisition plans. In a letter to the
shareholders, Mr. Jackson stated:
Your management also is taking steps to develop
additional reserve sources and new markets. The fact
that substantially all of our properties are developed
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