OT30300 - Capital Gains

Valuation of Oil Assets (including shares).

In 1992, an OTO Assistant Director spoke to a paper on 31 March 1982 North Sea Valuations at the Langham Oil Conference (see OT30871), setting out our broad approach to this issue. Since then we have considered an increasing number of open market valuations for more recent dates and for assets beyond the UK and UKCS and it is likely that this will continue as the North Sea province further matures and companies focus more on overseas exploration.

The following material, therefore, provides very general guidance for inspectors on the issue of valuing oil assets (including shares).

Primary responsibility for the valuation of oil licences and related assets rests with OTO. For the valuation of unquoted shares and securities in companies deriving their value from oil related assets, Shares Valuation (Edinburgh) retain overall responsibility. However, SV (Edin) may request that OTO negotiate the value of the underlying assets as a preliminary to the valuation of the shares. Moreover, where a 100% holding is to be valued, this too will be dealt with by OTO. This is because no technical adjustments for minority shareholdings are required, but where appropriate advice should still be obtained from SV (Edin) on non-oil asset aspects.

New cases should be notified to the OTO portfolio holder for oil asset valuation, currently Colin O’Donoghue, who can also provide additional general advice.

SV (Edin) has extensive experience of using discounted cash flow and other techniques to value a wide variety of business types and projects, including mineral interests. Also, they have access to Extel and other corporate, financial and business databases. SV (Edin) are always willing to advise or assist with valuations. To ensure that an overview of the issues is maintained please inform the OTO portfolio holder if you chose to deal directly with SV (Edin).