A friend of mine, Ted Reagan, who was a successful Independent Geologist, explained to me that office, log library and family expenses of about $1,000.00 per month would be required to survive as an independent. This sounded pretty challenging since I was only making around $850.00 per month with Texaco. My plan was to give two weeks notice and with my vacation accrual, my Texaco Savings Plan and pay for the two weeks notice I would have roughly $10,000.00. I figured along with the retainer from Texas Oil & Gas Co. this could last me a year. However upon my resignation, I was told that Texaco had changed its policy and no longer paid the two weeks notice period. My salary stopped the day I presented my letter, and I was asked to leave my office. So welcome to the independent world.
Working conditions were great. I was able to present what I considered to be a new prospect each week for the entire six months. I now think new leads would be a better definition of my prospects as Texas Oil & Gas only bought acreage on two during my entire tenure with them. Nevertheless I was not discouraged as this gave me the time and incentive to recreate the many ideas I remembered from undrilled prospects I generated during my Texaco days. So at the end of six months my retainer was terminated, and I had to learn the difference between a “prospect” and a “deal.”
Not unlike today, there were several ways to get a well drilled to test your idea. You could take it to a trusted Independent Operator, and ask if he liked it to check out the acreage, put the prospect together, get it drilled and pay you a minor finders fee and an override. You could go to another Independent Geologist and partner with him to help put it together, jointly sell it to an operator, split the fees and overrides or you could partner with an Independent Landman and do the same. Ultimately if you were able to assemble the acreage yourself, either through farm out or leases it became a “Deal” that could be sold, quite different from a prospect.
Crafting a “Deal” thus soon became the goal. Once you had the acreage in hand you were no longer at the mercy of a few trusted peers. You could now expose your idea throughout our industry because no one could go around you to participate in the prospect. Now the challenge was to find someone to buy your “Deal”, and this led to many interesting encounters where life long friends were made, disappointments were frequent, and occasionally a successful sale was made.
During this era, the late 60’s and early 70’s, Deal buyers were hard to find. Remember oil was less than $3.00 per barrel, gas was around 8 to 10 cents per MCF, proration was in full force and the maximum tax bracket had been reduced from 90 to 70 percent. There were a lot of tire kickers, but when someone sold a ‘Deal” the coffee shops and log libraries were alive with excitement. Who sold the Deal? Who bought it? Are they looking for more? Do they have money to spend? How many Deal buyers are in town? More often than not it was necessary to take your “Deal” to Houston, Dallas or San Antonio. These cities are where we met the players, the promoters and some of the oil company managers.
My first ”Deal” involved two prospects on a 2,000 acre lease held by Amerada with one year to go. It was my favorite area between the prolific Portilla Field (100 million barrels of oil) in San Patricio County and Roach Field (20-30 million barrels of oil) in Refugio County. After several approaches Amerada gave me the farm out on the entire block with 75 percent net revenue interest and subject to a quarter back in. I was off and running, but after showing this 20 or 30 times, I realized that although my ideas had huge potential and everyone who saw it complimented me on my work, the quarter back in was a killer for such rank wildcats. As I said I met a lot of good people who appreciated my work and would later become partners in other deals. One local company, Carrl Oil & Frio Drilling, promised that if I couldn’t sell the deal, and the lease expired, and they could pick up a decent lease they would honor my position with a $3,000.00 bonus and a three percent override. Sure enough it didn’t sell, and one year later Carrl picked up the lease, honored their commitment to me and drilled dry holes on both prospects.
One day while I was showing my dream deal, a geologist from San Antonio, J. B. Means, wandered into my office, and when I proudly explained my expectations, he counseled me “Dan what you need is an interest in an oil well, and after you build up some income then you can chase after an oil field”. Although I was able to sell one half of my override for $10,000.00 based on the two well commitment and could thus extend my livelihood for another year, I heeded his advice and started looking a lot closer in. True to J. B.’s advice I eventually had a small revenue stream from several single well deals.
During this time I began to share ideas with Bill Miller, another independent geologist in our library on the 9th floor of the then Vaughn Plaza. I had known Bill from my days at Texaco when we both worked the Wilcox in Duval County. Bill had just been let go by Ramada Oil Co., a small independent. This happened right after he discovered Southeast Loma Novia Wilcox for Ramada, a rather significant gas field for its time. Bill had a consulting retainer with Vaughn Petroleum Inc. of Dallas to attract and screen deals, so most of the ideas came from me as he tried to sell them to Vaughn. After the retainer expired we became much closer partners.
We got a lot of wells drilled as unofficial partners, mostly dry holes, but a few turned out to be small producers that gradually added up. During this time and ever since I have been an independent. Once a deal was sold I never let myself count on it being a discovery otherwise I might have been driven to drink, excessively that is, but rather knew that I now needed another deal and went right along with my mapping and selling. One year, however, when I reached my peak of drilling 12 of my best prospects in 12 months and the first 11 were dry holes. I left home in December, and I told my wife that if this last well was a dry hole I was going to shave the mustache that I had been wearing for several years. Well at 2:00 AM I called to tell her that I was not shaving. Bill had a saying that we were in the only business where you could go to sleep poor and wake up rich. This was the night – we found a Wilcox oil field at 5,500 feet and shared a quarter working interest in a million barrels of oil.
Next month: Part IV – “Becoming an Oil Man”