Avoiding Common Pitfalls in Oil and Gas Reserve Valuations

Oil and gas businesses often actively seek acquisitions to expand their oil and gas reserve base, enhance operational efficiencies and grow shareholder value. For these businesses to comply with U.S. tax reporting requirements for Fair Market Value (FMV) of the assets, they require impartial valuations. Companies preparing income-based valuation analyses often wrestle with recurring and challenging issues specific to the oil and gas reserves.

A close examination of these commonly seen issues/pitfalls can help acquirers estimate the FMV of oil and gas reserves for US tax purposes.

Valuations of O&G Reserves for Tax Purposes

For US tax purposes, valuations typically ...