One of the popular methods for a new or growing oil company to quickly build up a reserve base has been to acquire properties through an exchange of the purchaser's stock. While there are definite advantages to both the buyer and seller; in regards to tax treatment of the exchange, in market liquidity for the seller, and in conserving cash of the buyer, there are major considerations that the purchaser should consider, especially from the standpoint of synergistic value added to the purchaser with respect to additional reserves, cash flow, and market value of the purchaser's stock. Numerous companies have attempted to roll oil and gas properties into their reserve asset base through exchanges of stock. In some of these cases, the end result of the exchange has left the purchaser with a larger debt burden, and greater unanticipated capital commitments which end up adversely affecting the purchaser's stock price on the open market.1 There are a number of factors that need to be considered before a petroleum company pursues such a course of action. While the following ideas presented do not represent an all inclusive checklist, sufficient thought and preparation will help to lessen the dangers of the venture.

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