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resulting in a reserves value of $24,900,000. The final Lax
report explained that AA relied on data from acquisition
transactions and real estate investment trusts (REIT’s) to
compute the minority discounts applied to the subject interests.
The report did not include either a description of the studies or
their findings.
Mr. Lax compared the two indications of value, $24,500,000
under the guideline company method and $24,900,000 under the
reserves method, and concluded that True Oil’s marketable
minority value was $24,820,000 on June 3, 1994.
c. Gustavson Report and Respondent’s Position
The Gustavson report valued major assets owned by True Oil
as of January 1, 1993, and June 4, 1994, which included producing
oil and gas properties, the Red Wing Creek gas plant, the Little
Knife gas plant, and the Grampian pipeline. Mr. Gustavson did
not value the company as a whole. He explained that industry
practice would treat the value of proved reserves as the most
important (if not the only) indicator of value for a small,
independent oil and gas producer such as True Oil.
Mr. Gustavson used the discounted cash-flow method (income
approach) to value producing properties, and he used the boe
method (market approach) to verify those values because he
considered the boe method to be the least reliable valuation
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