PV10 Does Not Equal Fair Market Value
When it comes to Oil & Gas reserve valuations, PV10 value does not equal the actual fair market value of an asset. Many factors, such as volumetric risk, required rates of return, future pricing, inflation, capital costs, and taxes can all work together to discount the fair market reserve value of an oil & gas asset by as much as 30% to 60% below the PV10. Unfortunately, many investors and their legal/financial advisors assume that PV10 and FMV are equivalent, and therefore make improper or inaccurate investment decision or transfers between business entities. Don’t let this happen to you…call ValueScope to see how an accurate valuation of assets can save you money and time with respect to Oil & Gas reserve valuations and critical decisions.