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attorney, Mr. Swonke, to conduct title and lease reviews on the
Tri-Power properties. On the basis of the foregoing, we conclude
that petitioner's investigation of Tri-Power's reserves equaled,
if not exceeded, petitioner's investigation of Tri-Power's NOL's.
Respondent, however, is critical of petitioner's reliance on
the 1986 LAM reserve reports. Respondent contends that it was
absurd for petitioner to rely solely on the seller's reserve
report without an independent verification. We disagree. LAM
was an independent engineering firm, experienced with Tri-Power's
reserves. Moreover, it was petitioner's standard practice to use
the seller's updated (i.e., rolled-forward) reserve report to
evaluate potential acquisitions, and that practice was standard
in the industry. Next, respondent contends that the 1986 LAM
updated reserve report was unreliable because (1) it did not take
into account the 1986 updated production data, and (2) it
included several wells with little to no production history.
Respondent suggests that petitioner willingly disregarded 1986
updated production data because it would have resulted in a lower
reserve valuation. The 1986 updated production data, however,
was available to petitioner during its investigation of Tri-
Power's reserves. Petitioner was also aware that the 1986 LAM
reserve reports included wells with little to no production
history. Accordingly, petitioner had all the information
necessary to make its own determination concerning the value of
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