- 192 -
calculated guideline company multiples and True Oil’s financial
fundamentals. In addition, the relative weight Mr. Lax placed on
each multiple and whether he adjusted the data for differences in
accounting methods are also unclear.
Second, Mr. Lax valued True Oil based on an estimated value
of its reserves on June 3, 1994. Mr. Lax adopted the conclusions
of the Scotia report that fair market value of True Oil
properties on the valuation date was $34,800,000, based on both a
discounted cash-flow and comparative sales approach. Mr. Lax
weighted this value at 80 percent because he believed that a
reserve analysis based on discounted cash-flows was the best
indication of value for an exploration and production company.
Next, Mr. Lax reviewed exploration and production industry
acquisitions in the Rocky Mountain region that occurred within 1
year of the valuation date to establish an implied range of
dollars per barrels of oil-equivalent, which he applied to the
Scotia report’s estimated reserve volume to arrive at a value of
$27,000,000. He weighted this value at 20 percent. Mr. Lax did
not update his conclusions after the parties agreed to the value
and volume of True Oil’s oil and gas properties.
After combining the weighted results of the two reserves
methods, Mr. Lax computed a marketable, controlling value for
True Oil of $33,200,000. He converted this to a marketable
minority value by applying a 25-percent minority discount,
Page: Previous 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 NextLast modified: May 25, 2011