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B. Belle Fourche
1. Value of Total Equity on a Marketable Basis
a. Kimball Report
Mr. Kimball applied the guideline company method to value
the subject interests in Belle Fourche as of June 4 and June 30,
1994. He rejected the discounted cash-flow method, reasoning
that the cash-flow projections and discount rate determinations
required would be too difficult to compute and would not reflect
investors’ attitudes toward these types of companies.
First, Mr. Kimball identified four guideline companies from
the crude petroleum pipeline and refined petroleum pipeline
industries, which are similar but not identical to Belle
Fourche’s line of business. Mr. Kimball could not identify any
publicly traded companies that were engaged in crude oil
gathering.
Mr. Kimball then analyzed six market multiples: EBIT,
EBDIT, debt-free net income (DFNI), debt-free cash-flow (DFCF),
revenues, and TBVIC. As with True Oil, he used data from the
latest year and an average of the 5 preceding years to calculate
the multiples. Mr. Kimball weighted the EBDIT and DFCF multiples
at 30 percent each and the rest at 10 percent each. Mr. Kimball
explained that he chose low multiples to apply to Belle Fourche’s
financial fundamentals because the guideline companies were
larger and more successful than Belle Fourche.
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