Estate of H.A. True, Jr. - Page 118




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          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.             




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