Plains Petroleum Company and Subsidiaries - Page 20




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          exploration and development activities.  These two factors,                 
          declining prices and rising costs, combined to produce a highly             
          competitive market for the acquisition of developed oil and gas             
          reserves.                                                                   
               During 1986, Strevig & Associates (Strevig) was the leading            
          publisher of oil and gas transactional data.  Strevig tracks oil            
          and gas acquisitions, collecting all the available published                
          information on completed transactions.  Upon confirmation of the            
          data from both the buyer and the seller, Strevig publishes a                
          quarterly report showing the median price per barrel of oil                 
          equivalent (price/BOE) paid by buyers in those transactions                 
          reported.                                                                   
               Gas reserves are converted to equivalent barrels of oil to             
          provide a common unit of comparison when there is a mixture of              
          oil and gas reserves.  The standard conversion ratio is 6000                
          cubic feet (cf) of gas to 1 barrel of oil.17  The price/BOE is              
          determined by dividing the purchase price by the number of BOE              
          acquired.                                                                   





          17   We note that the same conversion ratio is used in the Code.            
          Sec. 613A(c)(4) equates 6,000 cubic feet (cf) of gas with 1                 
          barrel of oil for purposes of computing the taxpayer's daily                
          depletable natural gas quantity, which in turn is used in the               
          computation of the taxpayer's allowance for depletion pursuant to           
          secs. 611 and 613.                                                          




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