Compass Lexecon expert, Dr. Manuel A. Abdala was retained by Burlington Resources Inc., to provide expert testimony on the economic impact of tax increases followed by expropriation affecting Burlington’s investments in two crude oil production-share concession contracts of Blocks 7 and 21 located in the Ecuadorean Amazon region.
The Tribunal ruled that the expropriation was unlawful and sided with Dr. Abdala’s chosen methodology to determine the value of the expropriated assets as of the date of award using ex-post data (i.e., hindsight), based on a DCF valuation exercise. The Tribunal awarded a total compensation of $380 million on damages, which included both capitalized historical lost profits as well as the fair market value of the Blocks as of a current date. The Tribunal endorsed Dr. Abdala’s expert opinion on a number of key assumptions in the DCF exercise, including the use of multiple sources to forecast Brent crude oil prices, adopting it as the relevant marker to determine Napo and Oriente prices. The Tribunal also adopted Compass Lexecon’s expert recommendation of a 12.5% discount rate, computed following the conventional Capital Asset Pricing Model theory.
Dr. Abdala was assisted by a team of professionals under the leadership of Pablo López Zadicoff, and support from Carla Chavich and Mark Sheiness in Compass Lexecon’s New York office. Compass Lexecon worked with a legal team led by Nigel Blackaby and Elliot Friedman, of Freshfields Bruckhaus Deringer LLP; Jan Paulsson of Three Crowns LLP; Wade M. Coriell and Craig S. Miles from King & Spalding LLC; and Javier Robalino from the law firm Ferrere (Ecuador).