This paper builds upon previously reported prior work using data from fair market value sales of oil and gas properties and from capital market analysis to (a) examine the relationships among certain market valuation parameters and the ways in which those relationships may correctly or incorrectly influence evaluation practice and decision making and (b) to summarize and compare the results obtained from three recognized studies of evaluation data.

The examination of relationships portion will focus on two specific areas; (1) the relation of the discount rate to the rate of price and/or cost escalation used in an evaluation and (2) the relation of the discount rate to the performance of selected capital markets for debt and equity, and inflation. This part of the work examines some of the many questions and issues which are often raised regarding the use of market data for valuing properties and also regarding the selection of appropriate evaluation parameters.

The summary and comparison will contrast the construction, data analysis methods, and results obtained by three commonly used studies: (a) the SPEE Annual Parameter Survey, (b) the annual study done by the Texas Comptroller of Public Accounts for the appraisal of oil and gas properties, and (c) the Western States Petroleum Association annual study of oil and gas property sales and oil industry cost-of-capital. These studies are often cited in evaluation reports and in publication which discuss evaluation procedures. The three studies are found to have significant similarities of objective and results while starting from differing data sources and using different methods to achieve the reported results. The paper will show that the three studies, each with a 10-15 year history can be used together to define a continuum of evaluation information which provides a source of discount rate, price/cost escalation, and risk consideration data for knowledgeable persons involved in valuing oil and gas properties.

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