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Case Study:

Disaster averted.

Challenge:

O’Keefe represented the Defendant, a municipality, as a rebuttal expert involving a lawsuit filed by the Plaintiff, an oil and natural gas exploration company. The lawsuit was filed due to the City’s denial of an oil and gas drilling permit. Initially, Plaintiff claimed damages sustained in excess of $40 million attributable to the inability to drill for oil and gas on the subject property. O’Keefe was engaged to rebut the Plaintiff’s expert report and determine damages. O’Keefe’s challenge was to determine the impact of the inherent risks associated with Plaintiff’s drilling on the subject property incorporating the historical operations of the business. The oil and gas drilling industry is highly speculative which makes it extremely difficult to forecast revenues and profits. The economics of the existing developments and the complexities of the proposed development were complex.

Solution:

  • Analyzing the complicated entity structures and various royalty agreements involving Plaintiff and its related entities
  • Applying our knowledge of the oil and gas industry to our understanding of the economics of West Bay’s existing developments and the proposed development impacting the City
  • Utilizing complex statistical computations in order to produce analyses with different probabilities of risk and failure
  • Utilizing the discounted cash flow method to determine damages under both temporary and permanent taking scenarios where the city exercises its eminent domain power without actually divesting the property’s owner of title to the property
  • Forensic analysis of prior development history and capital structure

Results:

The parties were successful in reaching a settlement in favor of the defendant in this seven year litigation based on our report and findings.