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explained that it was not necessary to interview management in
this case for a number of reasons: Cash-flow was not influenced
entirely by management; he assumed that management policies would
remain unchanged; the pipeline industry was highly regulated on a
Federal and State level; and public information was available
regarding how much oil could be expected to flow through a
pipeline.
Mr. Gustavson concluded that the fair market value of Belle
Fourche’s pipeline assets under the DCF method was $34.62 million
on June 4, 1994. Mr. Gustavson also briefly discussed the
comparable sales and cost approaches to verify his conclusions
under the DCF method.70
According to respondent, Mr. Gustavson’s gross asset value
of $34,600,000 (rounded) minus outstanding long-term debt of
$17,115,350 represented the company’s net asset value. Thus,
respondent derived a marketable controlling value for Belle
Fourche of $17,484,650 as of June 4 and June 30, 1994.
70Under the comparable sales method, Mr. Gustavson examined
an unrelated purchase of a Canadian crude oil pipeline in July
1993. He used generally the same DCF analysis as he did for
Belle Fourche; however, he assumed that fair market value equaled
the purchase price and solved for net revenue per barrel of oil.
This resulted in a net revenue figure of .26 per barrel, which
closely approximated the .24 per barrel amount used for Belle
Fourche. Under the cost method, Mr. Gustavson reviewed appraisal
information prepared for tax assessment purposes by the Wyoming
Department of Revenue. For 1995, the Department of Revenue
valued Belle Fourche assets at $27,605,035, on a replacement cost
basis. Because this number was reasonably close to the DCF
method’s value, Mr. Gustavson stated that this validated his
conclusions.
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