Challenge
Solution
VRG employed a cost approach to determine the value of the tangible assets. The value of the tangible assets required the calculation of a significant economic obsolescence factor given their low utilization. To determine the value of the oil and gas reserves, VRG employed a Multi-Period Excess Earnings Method (MPEEM). In estimating the fair value of the personal property, the cost approach was used because it provided the most accurate reflection of the asset’s value to the owner-user on an ongoing basis. Determining an economic obsolescence on the tangible assets was challenging given fluctuating energy prices and uncertain production projections. To value the intangible reserve assets, VRG addressed valuation issues relative to the reserve interests.