How Opportune's Valuation and Reserve Engineering Teams Assisted an Estate's Tax Planning and Reporting

How Opportune's Valuation and Reserve Engineering Teams Assisted an Estate's Tax Planning and Reporting

The Challenge

Our client, a private estate, needed a valuation performed for interests owned in two entities for estate tax reporting purposes. Valuations for gift and estate tax purposes must follow the guidelines outlined in IRS Revenue Ruling 59-60 and require the use of specific valuation approaches and consideration of certain factors as set out in the ruling. The assets that needed to be valued for this project consisted mainly of interests in oil and gas properties, for which Opportune was uniquely qualified to assist because of our expertise in both reserve engineering through Opportune’s subsidiary, Ralph E. Davis Associates (RED), and oil and gas property valuation through the Opportune’s Valuation practice. With both practices working together, Opportune efficiently provided a deep base of knowledge and subject matter expertise to our client.

The Solution

To provide a thorough and supportable valuation, Opportune’s internal petroleum engineering firm, RED, prepared an independent reserves report of the client’s mineral interests. First, RED worked with the client to assemble well lists and ownership data. RED then retrieved historical production data from subscription data sources and prepared forecasts of future production using decline curve analysis. These forecasts, along with RED’s analysis of the commercial parameters of the wells, were used to prepare an independent reserve report of the producing assets of each entity in the client’s estate. In addition to the proven reserves estimates, RED prepared detailed maps of the mineral tracts and conducted a review of offsetting development and production to help quantify the value of the non-producing minerals.

The reserve reports provided by RED were then used by the Valuation team to perform a valuation to arrive at the fair market value of the oil and gas interests.

The valuation and corresponding narrative reports were delivered by Opportune to the client, providing an in-depth and defensible analysis of the owned oil and gas interests as well as a detailed discussion on the valuation approaches and assumptions utilized, and how Revenue Ruling 59-60 was considered in the valuation. Because of the expertise from both our in-house engineering firm and the Valuation team, Opportune was able to timely and successfully provide a defensible, well thought-out product for our client to support their estate tax planning and reporting needs.

Business Impact

  • The client received a defensible oil and gas property valuation for estate tax reporting purposes, which follows the guidance under IRS Revenue Ruling 59-60.
  • The client did not have to hire two separate consultants to perform the work necessary for the estate valuation. RED and the Valuation team combined their subject matter expertise, which allowed for a one-stop-shop solution for the client.

Related Insights

Paul Legoudes

Paul Legoudes

Managing Director
Kevin Cannon

Kevin Cannon

Steve Hendrickson

Steve Hendrickson

President of Ralph E. Davis Associates

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