Subject: Beeson - CONFIDENTIAL
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Thu, 26 Oct 2000 05:09:00 -0700 (PDT)

I am faxing you separately three pages from Don Ray George, reflecting 
calculations that I asked him to do concerning each individual plaintiff's 
damages shown by the Rhodes study.  Specifically, Don Ray, with Marianne's 
help:  (i) tried to determine the specific wells in which each individual 
plaintiff had an interest; (ii) located, from Rhodes' study, the 2-page 
sheets for each of those wells; (iii) added up all the over- and undertake 
"values" (dollar amounts) shown for that well in the Rhodes study; and (iv) 
applied plaintiffs' percentage interest to that amount.  He then added up the 
individual well amounts for each plaintiff, to arrive at that plaintiff's 
"actual damages per Rhodes."

The purpose of this exercise was to make a rough cut determination as to 
which plaintiffs will be claiming the most damages, and therefore, to help us 
decide which method of choosing ten representative plaintiffs would most 
benefit us.

In doing so, we gave plaintiffs the benefit of the Rhodes Study's 
methodology, with two exceptions:  (1)  for a given plaintiff, Rhodes added 
up only the undertaken "values," disregarding entirely and thus failing to 
offset overtaken "values;" in the scenarios on p. 1 and p. 2, we credited a 
given plaintiff's overtaken values against that plaintiff's undertaken 
amount;  (2)  Rhodes also added an "interest" calculation" to his numbers; we 
did not use his interest calculations at all, because they are totally wrong 
under the law.

But of course, Rhodes' methodology is totally flawed in numerous other 
respects as well -- so much so, in our opinion, that it is utterly defective 
-- and furthermore, plaintiffs have now indicated they want to rerun numbers 
using different (Intratex) data.  This is just our best effort to get our 
arms around some numbers at this stage based on plaintiffs' theories, with no 
consideration of most of our defenses as to each individual plaintiff and to 
all plaintiffs in general.

Page 1 shows the results for each individual plaintiff, crediting overtakes 
against undertakes.  DISREGARD the $27 million total; that is the total only 
if net overtakes from all of the overtaken plaintiffs combined are credited 
against net undertakes from all of the undertaken plaintiffs combined.  At 
least as of this stage, since we are not seeking contribution from overtaken 
plaintiffs, that number is not valid even under our current theories.  (It 
may become valid at some point, but for now, let's disregard it entirely).

Page 2 shows the cumulative total for all plaintiffs with damages, when 
offsets are not considered.  The total is: $50,528,850.

Page 3 shows the cumulative total for all plaintiffs, when overtake values 
are NOT taken into account.  The total is: $66,402,761.

A few observations about these numbers:

1.  First, many plaintiffs -- approximately half -- have no damages at all 
under the Rhodes methodology, when undertaken values are taken into account.

2.  If my hurried calculations are right, of the $50 million shown on page 2, 
$45 million represents the damages of only 8 plaintiffs (nos. 1-8).

3.  There are significant individualized defenses with respect to these 
plaintiffs.  It appears at this stage that Southwest Royalties is another 
Beeson -- i.e., that it acquired its interests in the wells after the 1978-88 
time period at issue.  We do not yet know that SW Royalties acquired the 
right to sue on the contracts.  With respect to Eclipse (Beeson's company), 
we're pretty sure it did not.  American Trading and Production (ATAPCO) had 
Panhandle gas, and litigated its "fraud" claim re: Panhandle; thus, all 
damages as of the time of the Panhandle agreements (1985) are plainly 
barred.  Almost all of Staley's damages would be foreclosed by a settlement 
he entered into in 1987 (I think that's the date).  We know Joe O'Neill 
deliberately underproduced a lot of the time.  Those are just a few examples 
from my memory, all of which underscore that these numbers are inflated.

4.  Of course, at trial -- since the court has not certified, and they are 
entitled to prove up individualized types of damages -- plaintiffs could try 
for damages over and above those shown by the Rhodes study, such as 
"reservoir damages" for certain individual plaintiffs, etc.  So these are not 
a ceiling, necessarily.

5.  Again, using the Rhodes study as a basis is very iffy to begin with, 
since plaintiffs have indicated they're going to redo their ratability 
analysis using Intratex numbers -- which may yield entirely different results 
-- and the Rhodes study's methodology is utterly wrong.  But at least it 
gives us a rough basis with which to work at this stage of the game.