- 198 - is appropriate to use the net asset value method (or what Mr. Kimball called the asset accumulation method), in conjunction with the guideline company method, to determine the value of True Oil. Accordingly, we treat the stipulated value of True Oil’s major assets65 as the company’s net asset value. Petitioners argue that the Kimball reports properly accounted for the value of True Oil’s reserves by using the reserves multiple in the guideline company analysis. We disagree for two reasons. First, Mr. Kimball’s reserves multiple was based on the stipulated physical volume of proved reserves measured in barrels of oil-equivalent, known as the boe method; however, the geological experts’ reports of both parties favored the discounted cash-flow method to value True Oil’s proved reserves and used the less reliable boe method only as a reasonableness test. Second, Mr. Kimball weighted the reserves multiple at only 30 percent, which we would consider low given the nature of True Oil’s business. Petitioners also contend that we should disregard altogether the net asset value method in determining True Oil’s entity value because the subject interests carried no liquidation rights so that holders of such interests could not access the underlying asset values. We disagree. Although the net asset value method yields the value of a controlling interest, a minority discount 65True Oil had no long-term debt on or around the valuation dates, and current assets generally offset current liabilities.Page: Previous 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 Next
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