Geology is the science and study of the solid and liquid matter that constitutes the Earth. The field of geology encompasses the study of the composition, structure, physical properties, dynamics, and history of Earth materials, and the processes by which they are formed, moved, and changed. The field is a major academic discipline, and is also important for mineral and hydrocarbon extraction, knowledge about and mitigation of natural hazards, some engineering fields, and understanding past climates and environments with reference to present-day climate change.

Etymology
The word "geology" was first used by Jean-André Deluc in the year 1778 and introduced as a fixed term by Horace-Bénédict de Saussure in the year 1779. The science was not included in Encyclopædia Britannica's third edition completed in 1797, but had a lengthy entry in the fourth edition completed by 1809.[1] An older meaning of the word was first used by Richard de Bury to distinguish between earthly and theological jurisprudence.

-Source: Wikipedia.

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Corpus Christi Geological Society
P.O. Box 1068
Corpus Christi, TX 78403

Coastal Bend Geophysical Society
P.O. Box 2471
Corpus Christi, TX 78403



Daniel Pedrotti - From My Generation to Yours

  1. Introduction
  2. 1958-1965
  3. Becoming an Independent Geologist
  4. Becoming an Oil Man
  5. The Roaring Seventies
  6. Becoming a Drilling Contractor - The Three for One Deal
  7. Survival in the Eighties
  8. Suemaur Exploration and Production - Challenges of the 90’s and the New Millennium



Part VIII - Suemaur Exploration and Production - Challenges of the 90’s and the New Millennium

With the acquisition of the Harkins’ exploration assets and the partnering with the exploration staff under the management of Bill Maxwell, Bill Miller and I were ready to jump into the 90’s. We would no longer be restricted to exploring above geo pressure, and we would again be looking for major reserves using what we considered state of the art tools and professionals. We now had miles and miles of proprietary 2-D seismic, several very prospective lease blocks, geologists who could integrate seismic with subsurface and a number of prospects, all requiring protection pipe. Our first admonition to our new partners was “we want to explore from the grass roots down – not just in the geo pressure realm.”

The new staff did not have to move. Bill Maxwell had already relocated the Harkins exploration offices from Alice to the Texas Commerce Bank Plaza, now Frost Bank Plaza, in Corpus Christi. Bill Miller and I decided it best to stay in our offices in the Bank of America building down town so that we would not be constantly looking over the shoulders of our professionals and distracting them. Instead we met with management on a weekly basis, and if there were developments on existing prospects or new leads we would go to our exploration offices, see the work, make suggestions based on our experience and encourage the originator.

In the process of becoming acquainted with each other and strategizing on how we would get our prospects drilled and be able to keep twenty five percent, Bill Maxwell introduced us to the “Exploration Co-operative Model” that had been used successfully at Harkins. Instead of spending days walking the streets of Houston, Dallas, Corpus Christi and San Antonio selling deals this model involved forming a joint venture with three other industry partners. All exploration expenditures were shared in proportion to each company’s interest in the venture. Venture partners could elect to get out of a prospect at defined points including the election to drill the initial test well. Each partner who elected to stay in, including Suemaur would pay their share of well costs. At payout of all prospect costs, Suemaur would earn an additional reversionary interest. This model allowed our geologists more time to explore and much less time selling.

In the early stages of the company’s formation, we decided that we did not want Suemaur to become a huge production company with a large staff of engineers, accountants and pumpers with all the headaches. We preferred to focus all of our efforts on exploration. Thus we established a policy that if and when we made a discovery, we would develop it to the point where we could reasonably quantify the reserves and then divest the property. This would free up our investment plus any profits to be used to develop new prospects.

Bill Maxwell invited several of the companies and individuals whom he had worked with at Harkins to become Venture Partners and thus very soon we were on our way to drilling the prospects we had acquired in the Harkins purchase and generating new ones. Many of our early efforts were disappointing, resulting in dry holes or noncommercial completions. A few of them provided critical control for future discoveries by other operators, but we were not there to enjoy the benefits. However, two prospects generated by Owen Hopkins, Bill Maxwell and a third by Bill Miller and Dan Pedrotti in Duval County, proved to be commercial discoveries. These fields, Sage, West Sage and Dejay Deep resulted in multiple development wells. Subsequently, following our policy, the properties were sold to recoup all the investment we had accrued under our new venture including lease positions on several new prospects that resulted in significant Suemaur discoveries.

This is when I realized that our old 2-D seismic and exploration techniques, that our staff had been using successfully in the 80’s was not getting the job done. Now we were in the 90’s, and new technology was becoming available, so I started reading up on 3-D seismic methods. Also at this time many of the Majors were divesting their old onshore properties, and I thought this is the perfect time to evaluate the fields that were up for sale, acquire one of them with large potential and do a 3-D survey on it. This is when I got a big surprise. I always believed that it is the “Old Guys” who resist change, but here I was an old guy raring to move into the 90’s. Of course there were many considerations such as financing, training personnel and acquisition of computers and soft ware. Still I knew that some how we had to move forward or miss out on the some great opportunities.

Suemaur had acquired leases on a portion of the Cage Ranch covering a couple of shallow leads that really didn’t make our economics. That is when I convinced our management that the Cage Ranch Field, discovered in the 50’s and redeveloped in the 70’s still presented sizeable potential from both the shallow Frio sands and the deeper Loma Blanca sand section. A large block of HBP acreage along with some new leasehold was ultimately assembled for a proprietary 3-D survey. Thus with strong support from our venture partners, Suemaur Exploration, Inc. plunged in the exploration world of the 90’s.

This bold move is extremely significant to the history of Suemaur. We acquired computers, the latest soft ware, huge printers and we sent our geologists and geophysicists to every available 3-D seminar and school. We had to learn the best practices and programs for acquiring, processing, interpreting and integrating 3-D seismic and well control. Our land department, lead by Jim Devlin worked feverously acquiring leases, getting farmouts and making deals with other lease owners who wanted to participate. Then when the data came in we realized that we were in a brand new world. I am still awed by how quickly our geologists and geophysicists mastered the interpretation techniques and the structural and stratagraphic surprises the data revealed.

Based on this 3-D survey and the excellent work of our staff we were able to drill numerous shallow producers and several very prolific Loma Blanca gas wells. We found the most unusual structural feature that I have ever seen in my 50 years as a geologist. Our 3-D showed us a true “hook fault”. It started out as a down-to-the coast branch of the main flexure trending east north east then curved around to the southeast and finally turned southwest to become an up-to-the coast fault forming a productive trap in the graben. In the process of redeveloping the Cage Ranch Field, Suemaur increased the production from 5,800 bbls of condensate and .335 BCF of gas per year to more than 40,000 bbls of oil and condensate and 5.9 BCF of gas annually. In mid 1997, Suemaur sold the property with six or eight PUDs and twenty locations for probable and possible reserves on very favorable terms.

Now that we had the tools, the experience and the confidence, our geoscientists defined a large area in Nueces County that contained a number of prospective leads based on subsurface and a number of regional 2-D lines. Beginning in 1997, we permitted a 100 square mile proprietary 3-D survey and just as we mobilized the seismic crews in September the rains came. I think we paid three or four week’s standby time before we pulled the crews. Our patience paid off. Many of our leads turned into drillable prospects and we found and developed several substantial fields that we were able to divest on very good terms. We also shot proprietary surveys in San Patricio and Kleberg County, but they did not work out as well.


Tommy McCullough, Mike Lucente, Mike Pedrotti

About this time another geologist, Mike Lucente, who Bill Miller and I had been trying to hire, became available. We had become acquainted with Mike years earlier when while working for Getty Oil Company he discovered the prolific “El Gato-Lobo Field” in Webb County on acreage where we had a nice override. Mike came to Corpus to work for Edwin L. Cox where he proceeded to offset our El Gato leases with a number of the best Lobo wells in the entire trend. Needless to say we wanted Mike to work for us. He did not take the job, and that was probably a very smart move as Bill and I really did not know how to support an aggressive geologist like Mike.

Mike had a great career with Cox making a number of significant Wilcox discoveries and in the early 90’s when Cox shut down their offices in Corpus Christi, Mike was looking for an ownership position. But before we could talk to him, my son, Mike Pedrotti and his brother in law, Tommy McCullough, made Lucente a deal he couldn’t pass up. In 1993 they formed a three man partnership called LMP Petroleum, Inc., for Lucente, McCullough and Pedrotti to explore for oil and gas in the Texas Gulf Coast “on shore” and that is when we finally got to work with Lucente. LMP needed partners to cover overhead, prospect development costs and participate in the drilling and development of their prospects. We along with several other independents were asked to front these costs. Bill Miller and I immediately joined LMP as equity partners.

LMP was structured a little bit different from Suemaur. The equity partners would fund all the up front money and LMP would develop the prospects, acquire the critical acreage, sell as much promoted interest as we desired and get the exploration well drilled. They would then repay the sunk costs and share any remaining profits and back in interests with the equity partners. The equity partners could drill up to one half of their interest heads up without promotion and any additional interest subject to the promotion being offered on the street.

This turned out to be a very profitable and exciting venture. These guys were aggressive, well known in the industry and determined to be successful. Lucente, the geologist, using his incredible energy, Wilcox experience and a few suitcase ideas he had developed at Cox soon had a basket full of prospects for us to approve. Mike Pedrotti, well known by many landowners from his years as a bare back bronco rider in South Texas, and work in the land department of Texas Oil and Gas Corporation was the landman, and Tommy McCullough with drilling and engineering experience handled the economics and drilling contracts.

LMP also started with a fairly large library of 2-D seismic data, regional maps and quite a few tight logs, but soon became 3-D literate. At first they acquired commercially available data and after significant successes moved on to proprietary projects, and through data trades soon had access to hundreds of miles of 3-D coverage. Moving into the 90’s and using the new technology required a sizeable investment in computers, printers and a lot of software that was bought by the equity partners. This additional investment soon paid for itself with high quality prospects and several significant discoveries. In short order we all had quite a handsome revenue stream from oil and gas properties.

That was the 90’s. Now we are in the first decade of new millennium. All sorts and sizes of 3-D surveys are on the market. There are very few places to prospect that haven’t already been covered by 3-D projects. That’s the bad news, but the good news is that you can purchase this data either for a specific prospect or for regional work on some very reasonable terms. I was concerned that once all of our trends were explored with such comprehensive seismic coverage there would be nothing left to find. Again I was totally wrong. Although it still surprises me that data that has been looked at and reprocessed many times can still be useful to our creative people who use their intelligence, curiosity and experience to keep coming up with economically viable prospects leading to new fields and new trends.

Fortunately both Suemaur Exploration and Production, LMP and I hope most of you are well positioned to take full advantage of the new technology that is constantly evolving. By aggressively pursuing the educational development that will allow you to glean more and more ideas from new and existing data sets and new geological concepts, you have huge exploration opportunities. Hopefully the decade starting in 2010 will be as exciting as the last few.

Well this is the story of my 50 years as a geologist and investor searching for oil and gas in the onshore Gulf Coast region, mainly in Texas. It is not the end. I am looking forward to the new innovations to come in the next decade less than one year from now. We have been so successful utilizing the new technological advancements such as amplitudes, and all the other subtle attributes hidden in these masses of wiggles and traces that I am optimistic that we will continue to lead the challenge of finding domestic reserves. Be sure not to overlook new geological concepts. Who would have ever believed that Wilcox sands would be found in the Gulf of Mexico and possess prolific reserves of oil and gas? I want to be with you on the edge of the envelope as we move into the new decade starting in 2010.

Thanks for giving me the opportunity and incentive to give my view of the contributions made by geoscientists, both Independents and Major company employees since I entered the industry. May all of you be successful, find a lot of good prospects and enjoy the excitement and rewards of discovery as much as I have.

Dan Pedrotti
Geologist


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Part VII - Survival in the Eighties

Our style and expertise in putting drilling deals together and finding oil peaked in the early eighties. Instead of studying up on the new technology like other professionals were required to do, we diversified.

Much to our dismay the city had just passed a bond issue for a convention center and as we looked down from our offices, up on the hill, at all the vacant property on Ocean Drive, and we mused that we were going to have all these conventioneers without any hotels for their accommodations.

Bill had a great idea. Property is cheap so let’s buy a block on Ocean Drive and promote or build a modern hotel. We started buying parcels in the block where the Omni Marina now sits. We had all but one tract under option, but the owner, Josephine Sparks, had the same idea and would not sell or participate with us. In desperation we sold our options to her, got Joe Baria and Margaret Turnbull as partners and purchased the block where the Omni Bay Front Hotel sits. Josephine got her hotel going first, a Marriott, and we sold our block to the Hershey Foundation of Pennsylvania, and they built the beautiful Hershey Hotel that after several name changes became the Omni Bay Front Hotel.

In the mean time we got the bright idea of building a Petroleum Building to house all of our independent friends. We would move a log library in and become the center of oil and gas exploration for all of South Texas. We optioned the block between the two hotel sites and contacted our fellow independents and got eight more of the leading explorers and producers to commit to a tenth interest and bought the block. We had an architect draw up a conceptual design for the building and while we were reviewing the plans a man named Jim Kozak, representing Bruce Stark, a high profile developer from Honolulu, contacted me. Jim was aware that we controlled two city blocks across from a proposed fourth landmass in the Corpus Christi Marina.

When he showed us his design for an office building (One Shore Line Plaza) connected by an overhead walkway to a hotel in much the same design as the office building, and then connected to the proposed new landmass we were blown away and began negotiations. Unfortunately, we were too far long in our dealings with the Hershey people who were ready to break ground for their design, and thus we were unable to interest them in the joint project. Even though by now the new landmass had been voted down, Kozak convinced Bruce Stark to go forward with the office building. We entered into an agreement whereby we would put our land in as equity and be co owners of the project, but as time passed it became necessary for Bruce Stark to own the property in order to acquire proper financing. They purchased our interest for a sizeable profit to all our partners. Although we were disappointed in not having ownership, by the time the building was completed, oil and gas values had plummeted, the South Texas economy cratered and the building had to be sold for the bank note. Had we stayed in the deal we would have lost not only the huge profit but our investment as well.

Not all of our diversified ventures were so successful; in fact one was a total disaster. This time several of our peers came to us with a great idea. They were familiar with the shallow offshore production activity and knew that most of the platforms were getting old and in dire need of maintenance. The idea was to build portable jack-up work over rigs to service the shallow Gulf of Mexico well platforms. They had a design, and an engineer who thought he could build one. This sounded great so we acquired a lease from the Port of Corpus Christi on Rincon Channel, a commercial development on the west side of North Beach, promoted up a couple more partners and started a ship yard.

After huge cost overruns and delays our first jack-up named “Popeye”, was launched with much fan fare, but on its maiden voyage it almost sank. We fired our engineer, hired a former employee of Cinco Drilling Company, and then the disaster began. Our new manager turned out to be not only incompetent, but was also a crook. He started a ponzi scheme that nearly broke all of us. Not content to build deck barges that we were capable of completing with reasonable expense, he launched into such complicated projects that even the most experienced ship yards would not take the contracts. His scheme was to take large pre-payments that he used to cover cost overruns on existing jobs, so his only means of survival was to continue to obtain new contracts on more complicated projects while still unable to complete the work he already had in the yard. He was also skimming money and hiding our payroll tax checks in order to use the money to keep the yard open, and of course his job.

Finally at one of our meetings where we needed another cash call to cover payroll taxes that had not been paid, one of our partners noted that the only people making money on this venture were the vendors, the employees and the manager. We had already lost millions as we tried to float this sinking ship, and there was no end in sight. Then J M Smith uttered the unthinkable words “BANK RUPTCY”. There was no possible way that we could collectively provide enough funds for these projects that were impossible to complete. After getting over the shock and realizing that this was our only alternative we hired a bankruptcy lawyer and like flying into a black cloud without instruments, we embarked on a seemingly unending series of meetings with banks, clients and lawyers. I learned a hard lesson -- don’t try to get into something you know nothing about, and don’t try to run a company when all you’ve ever done is manage yourself.

We hadn’t given up completely on exploring for oil and gas, so we tried hiring geologists to do the work for us. Here again our inexperience at managing employees became our “Achilles Heel.” At one time or another we had four different geologists in our office on the pay roll. We drilled a few dry holes, and finally one little 500 mcf a day well. We didn’t think much of it, but you know it is still producing 500 mcf per day. We eventually hired Duncan Chisholm who got us to buy a few lines of 2-D seismic on several leads and even got us to shoot a two mile line in Hidalgo County.

Based on this line we acquired leases offsetting some great wells that had been drilled by Roger Steward, Forest Oil Co. and Neil Hanson and drilled our first protection pipe well. This was a big step as we had a firm policy to operate only wells that did not require intermediate pipe or fracking, so that we could afford to keep a quarter interest. The well was a marginal producer that lost money, but Duncan pointed out that one of the leases had an old shallow well with an oil show, so we renewed it.

Then in 1985 when the bottom of our industry fell out, we basically became inactive. Fortunately, we were debt free and owned several parcels of prime property. Bill was cruising the world’s oceans, and I was following my quest for the wild sheep of the world from Baja California across western United States, Canada, Alaska over to Asia, Siberia, Mongolia, Nepal, Kirgestan, Kasikstan, Azerbajan and Pakistan. While Bill and Maureen were dining and dancing in luxury aboard the QE-2, Carolyn and I were sleeping on the ground in tents on the sides of goat trails in the mountains and deserts of Asia. I don’t know who was having the most fun, but Carolyn loved camp life.

So while the smart independents such as Harkins and Tana, were furnishing their explorers with large 2-D data sets that were available everywhere and very inexpensive, we were giving our geologists one line at a time. Even though natural gas was selling for less than $1.00 per mcf, and oil around $5.00 per barrel these companies were doing just what all of us should be doing this year – finding new prospects, buying acreage and developing reserves. Everyone was longing for the good old days, but as J M said “these might be the good old days.” Fortunately he was wrong although it took over a decade to improve.

But, miracles do happen to those of us who take risks and expose ourselves to unknown opportunities. Sun Oil Company wanted to drill a deep well on the lease we kept with the shallow oil show. They had the offset acreage, and we agreed to farmout the deep rights for a quarter back in and keep three quarters of the shallow rights in case the oil show was real. One Sunday morning Bill got a call from a Sun geologist who informed him that they had already logged the intermediate hole down to 7,500 feet and forgot to notify us. Bill was furious at first, but when the geologist told that they had logged over 300 feet of gas saturated sand, Bill apologized and called me with the news. I then reminded him that we still owned a fifty percent interest in the lease. Sure enough Sun’s deep objective was dry, so all we had to do is complete what became the Suemaur #1 Acevado, discovery well for Suemaur Field.

In order to keep up with Sun’s direct offset that they produced wide open, and although we were unsuccessful in any serious development as the structure covered less than 60 acres we had to open our chokes and were thus flush with income. That is when Bill Maxwell walked into our office to give us the news that Harkins Drilling Company was liquidating their exploration department, and he and the staff were looking for someone to buy the assets, hire the staff and let him run the new company. The assets consisted of hundreds of miles of re-processed 2-D seismic data, leases on eight or ten Wilcox prospects, and a team with a very successful record at finding oil and gas in South Texas. Bill and I had made several unsuccessful attempts to hire Bill Maxwell, so when he walked out of our office, Bill Miller asked me “What should we do?” I immediately answered don’t let him talk to anyone else this is a chance of a lifetime, and we have to figure out how to make it happen.

This was 1990 and our business was still in a slump. Our next move was to contact J M Smith, an experienced Geological Engineer, owner of Genesis Petroleum, a very successful operator and a former partner of ours in the ship building disaster. He agreed to take a one third interest in our venture, let us keep the Suemaur name, and we began negotiations with Burt Harkins to buy the assets and closed the deal within weeks. This was the beginning of a very fruitful and exciting venture under the leadership of Bill Maxwell, which has grown into one of the most successful and technically advanced independent oil and gas companies exploring the onshore areas of the Texas Gulf Coast.

Next month – Suemaur Exploration and Production Co. the challenges of the 90’s and the new millennium.

Dan Pedrotti
Geologist


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Part VI - Becoming a Drilling Contractor - The Three for One Deal

One June evening in 1974, while I was relaxing in my back yard pool, I was called to the phone to speak to Leo McCloskey, a petroleum engineering partner with Frank Morrison, a geologist, in Mormac Operating Company. He wanted to discuss an opportunity to become involved with drilling rigs. Rigs were really getting scarce and Mormac felt that if they were to continue drilling their deals they had to own a drilling company. I met with Frank and Leo the next day, and they proposed that I become their chief geologist as a third interest partner in purchasing Bagget Drilling Company, a small contractor in Eagle Pass Texas. Bagett had three shallow beat up drilling rigs. After discussing this with other former drilling contractors, I was advised against such a move, but being venturous and as I would not consider abandoning my own partner, I talked to Bill Miller. I found him to be very enthusiastic. I then told Mormac that they could have two geologists for the price of one, but that Bill had to be included. They were not too hot on the idea at first, but when they ran into difficulty with their financing, they agreed to include us for a third if we would finance one of the rigs. Bill and I had to use our Charamousca production as additional collateral to secure the loan. Each partner, including Mormac’s CPA, Gordon Lansford, put up $1,000.00, financed the rest and the five of us founded Cinco Drilling Company. Originally we referred to the venture as broken mast drilling company as all three of the rigs were barely more than junk, but after five years with Jack Holden as superintendant we owned five of the finest rigs capable of drilling wells in the 5,000 to 10,500 foot range in South Texas, a fleet of trucks for moving them and a yard in Alice, Texas.

All did not go great for Cinco. When we finally got our rigs up to par, we leased two of them to Jack Stanley’s Trans Texas Company that was drilling in the Lobo Trend of Webb County. This contract was secured by a $200,000.00 letter of credit and we were paid promptly until one morning at our Cinco Directors’ Meeting, I asked if the letter of credit was still in effect. Our company president assured me that it was, but I wasn’t convinced. I asked him to go get it, and sure enough it had expired the day before. That was the last payment we received and after shutting down and moving our rigs out we filed mechanics liens only to be told by Mr. Stanley’s Boston judges that the liens would not be honored. This nearly broke Cinco, but somehow we held on. We had declined to move a rig onto the DCRC to drill for Clinton Magnes as we were sure he would not pay and might even confiscate it behind locked gates, so we did dodge that bullet.

Mormac, being a two thirds owner, ran the company and maintained the executive offices in their suite in the Vaughn Plaza (now the American Bank Plaza). Thus all the operational problems, the calls in the middle of the night and minor financial difficulties came to Leo and Frank. Bill and I were basically directors and called upon only when major problems arose, so although we weren’t making any money, our notes were paid and we didn’t feel the stress of the many day to day decisions, so in 1978 when Mormac was ready to sell out. At first we were not to keen on the idea.

It turned out that Frank Morrison had an old college friend who was now a Vice President of Delhi International Oil company. Delhi was an active oil and gas company that went to Australia and discovered huge oil and gas fields on concessions covering over 50,000,000 acres. Their net Australian reserves in 1978 totaled 680 billion cubic feet of gas and 56 million barrels of oil. Their problem was getting most of this production to market, as it was located in remote parts of the country. They had plans to build pipelines, get the wells on production and to reinvest the income from these fields back in the United States through the purchase of drilling rigs to be used to drill their way into good deals.

Cinco was the perfect vehicle to accomplish this plan. When they approached us and described their company assets it was pointed out that Delhi owned the equivalent of 10 barrels of oil for every outstanding share of stock. The original plan was for Delhi to assume our bank debt and pay us a nominal sum for the equipment and blue sky, but when I realized that their stock was selling for $7.00 to $8.00 per share and that at $10.00 a barrel the stock had a potential value of $100.00 and knowing that banks were projecting $100.00 per barrel oil, I suggested that we do a stock exchange instead of a cash deal. My partners’ initially thought I was nuts and that Delhi would not consider such a transaction. However, I insisted that we propose it and low and behold they thought it was a great idea. Delhi immediately acquired a large block of their stock owed by investors in Canada for $6.00 per share and traded it to us at $8.00. Well we did see our stock trade for over $100.00 per share after two three-for-two splits. Fortunately In September, 1981 right before oil prices collapsed CSR, an Australian based company, bought Delhi International for $78.00 per share and we sold out with them, thus ending our brief but exciting venture in the drilling business. Not a bad return on our $5,000.00 capital investment.

The eighties started out strong with oil selling for $50.00 a barrel and natural gas around $10.00 per mcf. Much like this year there was no end in sight and banks were loaning on the possibility of $100.00 oil, but by early 1982, red lights were flashing. The election of Ronald Reagan brought about a reduction in the maximum income tax rate to 50 percent and eastern investors were leaving the business. Just in the nick of time the three-for-one concept came along. Some lawyer back east devised a scheme that allowed the write off at the rate of $3.00 for every $1.00 spent on IDCs. I am still not exactly sure how this worked, but an operator would have to be the completion partner who put up the tangible completion costs so that the investor who got benefit of all the intangible drilling costs actually made money with a dry hole. Needless to say the drilling dollars poured in and spawned a whole new group of promoters, such as King Resources, who had unlimited budgets. The situation created some wild Decembers as all the tax money had to be spent before the end of the year. We would be signing drilling contracts, participation agreements and escrowing millions of dollars well into the night on New Year’s Eve. Most any deal that was put together was sold. Unfortunately this scheme was short lived as congress got wind of it and passed legislation to outlaw the practice.

Then in 1985 the oil industry was called upon to win the “Cold War.” History chronicles how Texas oil fueled both World Wars I and II, the Korean War and Vietnam. Now with President Reagan realizing that high oil prices were funding Russia’s Military threat by providing the hard dollars they could not otherwise obtain, he determined to dry up the source by destroying the value of oil on the world market. He did this by making a deal with Saudi Arabia to open the spigots creating a glut of oil on the world market and breaking the back of OPEC . It was a brilliant strategy. The “Cold War” ended, the wall came down and our domestic oil industry collapsed along with the Savings and Loans who were riding the prosperity of high energy values. So the cold war was won on the backs of the finest cadre of Geologists, Geophysicists and Petroleum Engineers our industry had ever employed. Then when we begged congress the help our domestic industry develop our own reserves and save this great human resource, they laughed and many of our brilliant young scientists ended up changing careers, teaching and some mowing lawns. Thus our industry lost our most important asset and now we are importing well over half of our oil from people who despise us.

No one expected the collapse to last for a decade, but it did. Next month I will describe survival in the eighties and early nineties on $3.00 oil and $1.00 natural gas. It wasn’t fun, but some of us eked by, some left the industry and others made fortunes.

Dan Pedrotti
Geologist


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Part V - The Roaring Seventies

Exploration in the seventies started out much the same as we experienced in the late sixties. Oil and gas commodities were still cheap, proration continued and Congress was trying its best to eliminate what they considered loopholes in the tax laws that provided for write off of intangible drilling costs and the depletion allowance. Local Independents joined TIPRO and IPAA members in numerous trips to Washington trying to make them understand the need for these incentives in order to forestall increased dependence on foreign sources of oil. Some members of Congress listened while others were so jealous of Texas oil they refused to even meet with our delegations, so the battles continued between the producing and non-producing states. The top income tax bracket now seventy percent (70%) dried up some to the capital coming into the business.

Despite these conditions, the Oil and Gas Exploration business, though not lucrative, continued at a brisk pace. Good deals were always marketable and there were quite a few deal buyers. Net revenue interest was critical and anything less than seventy-five percent (75%) was out of the question. Since most farmouts started at this level, overrides were considered impossible. We could still acquire landowner leases at favorable royalties, but since so many deals depended on farmouts, back in after payout became our only recourse in most cases.

Deals were not easy to sell. We usually had to go to Houston, Dallas or San Antonio to find someone who agreed with the potential and risk associated with the prospect. We mostly went to Houston and as we could not afford to fly, a typical selling trip went something like this. We would leave Corpus Christi around 5:30 or 6:00 AM, and drive to Houston in order to arrive after the traffic rush around 9:00 AM and we would try to show our deals at least three times. If we completed our appointments by 3:30 PM we would head back to Corpus. If however, we were delayed past 4:00 PM we would meet some of our friends at a bar and relax until 6:00 or 7:00 PM to let the traffic clear and then head home.

Not all deals were that hard to sell. One of our first deals where we were able to get a quarter back in after payout was at South Charamousca in Duval County, Texas. Exxon had just released logs on quite a sizeable oil field in the Upper Wilcox on the Northeast side of Charamousca Dome. My partner Bill Miller began mapping the field and the rest of the dome when he found a sizeable up-to- the coast fault crossing the southeast flank. He called me in to show me a closure he could map against the high side. While we were scratching out the details, Winn Sexton who was working with Kelly Bell at the time happened to come into our office and saw our map. We explained the prospect and told him that we were sure we could get a seventy-five percent net interest farmout from Mobil with no back in as this was DCRC acreage.

Winn said “let me take that map up to my office for a few minutes” and thirty minutes later he returned and asked what we would take for the deal if we got the farmout. Our answer was $3,000.00 and a quarter back in after payout. He replied, we’ll take it, go get the farmout. The well worked with 50 feet of pay that disappointedly started out as a gas well, but then turned to oil. It did pay out and we had our first working interest. Unfortunately we were unable to offset this well, but it kept our curiosity alive and we continued to work on that side of the dome. I have reproduced that map below to show that a good deal in those days did not have to be very sophisticated. Later, when we formed Suemaur Corporation, I used this structural drawing for our logo.



Things were picking up in 1973, so we decided it was time to cut out the middle man, get turnkeys through logs and/or plugging and operate as Miller & Pedrotti. On our very first operated well, the Miller & Pedrotti #1 Ragsdale, we had Frank Forester, a consulting engineer operating the drilling side, and late one night as we were approaching total depth he called to tell me the well was kicking. I called Bill Miller only to find out that he was in San Antonio undergoing extensive allergy tests and was not available. So with all the responsibility on my back, I headed for the well. Fortunately it was a turnkey job and as soon as I saw the log and knew it was a dry hole, I gave the contractor permission to plug, wiped the sweat from my brow and headed home.

Our minor success at Charamousca kept us busy trying to find the rest of the oil that didn’t belong to Exxon. While mapping and searching the nearby data we found a deeper down dip well that had cored oil in a thin sand well below the top of the Wilcox. Based on this show and a second fault parallel to our discovery fault that we assumed to be down-to-the coast, we mapped in a nice looking anticline. We got seventy-five percent net interest farmout from Mobil on the northeast quarter of Section 288, acquired a forty percent back-in option farmout from Killam & Hurd and purchased a 160 acre lease on the Worden & Drought track. We got a turnkey bid from Rhodes & Hicks Drilling Company for a 7,000 foot test for $37,500.00 through the logs or plugging. We thought we had a very salable deal.

Surprise, every one who saw the deal, loved the concept, but no one wanted the obligation of having to drill an offset well on the forty percent back in Killam Tract within ninety days of completion of the first well. We lowered our sights and began asking for a mere one eighth back in and still no takers. Then in late November a miracle happened. John Manley, a seasoned operator, returned from New York with a sack full of drilling dollars and desperately needed a deal, so we were forced to sell it to him with our original one quarter back in. Well as Bill Miller used to say “In this business you can go to bed poor and wake up rich” because at 9:00 PM while Bill was snoozing in his car, I pulled a log with 100 feet of oil pay on a prospect covering 150 to 200 acres. I woke Bill up and told him that we had a quarter interest in at least 1,000,000 barrel of oil and as oil was approaching $10.00 per barrel we were each millionaires.

It was the night of the annual Baroid Christmas party, and as Bill started his car to head in for the party I reminded him that we needed to keep this well” tight” until we figured out if other acreage was involved. I stayed at the rig to bring the cores back, and when I got to the party two hours later everyone was congratulating me on the discovery. So much for tight lips Miller. Our controlling fault turned out to be up-to-the coast, and we caught a nice up thrown closure at the top of the Wilcox that was filled with oil. We never did figure out the reason for the show in the down dip well.

This was 1973 and the beginning of the roar. The OPEC embargo caused panic at the gas stations, and oil started climbing toward what most banks thought would be $100. Of course it didn’t get there, but the value of our oil property was escalating faster than we could produce it, and drilling costs were going crazy. We drilled four more development wells, and the last one – turn- keyed to only 5,500 feet cost over $100,000 and just like today pipe was so scarce that we had to run used casing and tubing. Also you had to guard your pipe on location to keep if from being hijacked. In fact we lost a complete string of tubing down in Hidalgo County.

Bill and I were now at the top of our game. With our successes we were considered a reliable source for good deals. As I said earlier in my stories, each decade seemed to have its’ own special exploration techniques. We had mastered the use of available technology and seat of the pants regional mapping and exploration. We had very little access to seismic, and it always seemed when we did find some it tended to conflict with our ideas so some real ingenuity and creativeness was required. We were so efficient in putting deals together that one promoter from Houston suggested that we change our name to “Dial-A-Deal or Deal-O-Rama”. He told us that all he had to do when he came to town was tell us what county, what formation and how deep a deal he was looking for, and we would have one ready to show him.

We barely missed being the discoverers of the Lobo trend in Webb County. We had heard rumors of significant discoveries just across the border from Laredo. We couldn’t get the logs, but in researching the dry hole logs on our side we found an old Humble log that had a couple of obvious thin productive sands right below intermediate casing. The lease was held by Conoco, and when we inquired about a farmout their land man told us that Tony Sanchez was on his third and last extension of a farmout and that in 30 days if he hadn’t performed we could have the acreage. Well he sold his deal, and history was made on this lease when Consolidated Oil & Gas drilled the discovery well for the prolific Lobo Trend that covers most of Western Wells County and is still being drilled.

We did eventually get a fair share of the production from this trend. Early as an independent I teamed up with Paddy Lann, a prominent landman, in trying to get a farmout from Ginther, Warren and Ginther on a tract in Webb County known as the Webb County School Land. While with Texaco I had tried to get a well drilled on this tract. I remembered the prospect, and since Paddy knew the people at Ginther we went to Houston to talk to them. When I described what my prospect was about, Mr. Ginther pulled a map out of his desk, and said is this what you mean. I was completely stunned, as he had a direct copy of the Texaco seismic picture I had tried to get drilled. Anyway the lease finally expired, and we were able to put a deal together that didn’t work well but kept our acreage together and guess what, it ended up in the middle of the Lobo play. I am still getting income from these leases.

Our other exposure to the Lobo came about as a result of my relationship with another active land man, Seymore Wormser. Seymore and I had worked on a couple of deals and ended up serving together on the board of the First State Bank at six points. One day he came into our offices with a 5,000 acre, five year lease in Northern Webb County that he could get for $20.00 per acre and three sixteenths (3/16) royalty. This sounded interesting as we could carve out a nice override, and he agreed to go thirds with us. We found a 20,000 foot Hunt Sligo test in the middle of the block. We were not deterred by this as we would be working only the Wilcox. Hunt had a field office just north of Copano Bay, so we called the engineer and he invited us to come up and review the well files. We discovered that the well had encountered tremendous gas shows through the Wilcox sands though there were no obvious pays on the logs.

Based on these shows the three of us went to the bank, cosigned a $100,000.00 note and acquired the lease. We conjured up an Upper Wilcox prospect in the center of the block and were getting the maps together to start showing the deal when Bill happened to be in Houston visiting an old friend of ours, Dale Mueller, who was now a District Geologist working for Skelly Oil Company. Dale was worried that Skelly did not own a single lease in the Lobo trend that was now the hottest play in Texas. Bill said “you came to the right place and we can solve your problem.” We happen to have the last open acreage available, and you can be a hero by paying us $50.00 per acre for a seventy-five percent (75%) lease leaving us a one sixteenth (1/16) override. Dale was happy, and we were delighted. Skelly merged with Tidewater and for five years did not drill and had to extend the lease.

In the meantime we were desperately trying to get a farm out to protect the lease, but they would not let us have it. It turned out that a young geologist, Mike Lucente, had mapped a Lobo prospect on the lease and was determined to get it drilled. Low and behold, Tidewater drilled and found the largest Lobo Field in the entire trend with massive high porosity and permeability sands that today after producing over 120 BCF of gas is still alive and kicking. This field with the best reservoir rock in the trend defined the northeasterly limits of Lobo sand development. We tried to hire Mike, but Cox out bid us. He then proceeded to offset our lease block with a number of great Cox wells.

Well this is probably enough for now, so next month I will tell about becoming a Drilling Contractor and the three for one deals.

Dan Pedrotti
Geologist


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Part IV - Becoming an Oil Man

In my previous essays on the subject of becoming a petroleum geologist, I left out a very important group of individuals who played such a critical part in the careers of so many of us and especially mine -- OUR MENTORS. Starting with my professors in graduate school at Texas A & M and continuing through my time with Texaco, the people who provided the counsel, taught me the exploration techniques and showed confidence in my work, which made the difference. I point this out now because I think members of our society are doing a bang up job of mentoring by hiring geology students as geo-techs. What better way to mentor an aspiring student than to have him in your office pulling logs, checking records and looking over your shoulder while you work on the computer or draw maps. Being around for the successes, as well as the dry holes has got to be the influence that drives them to success in their studies and gives them a desire to pursue a career looking for and finding oil.

Speaking of mentors, I had some of the best both inside of Texaco and out in the independent world. By actively participating in the Corpus Christi Geological Society, the Corpus Christi A & M Club, the Oil Man’s Bowling League and even playing soft ball with a group of independents, I became part of a peer group that would become my mentors. As I socialized with these oil men, I became intrigued with the idea of owning a part of the income from my work. They did not consider me a threat or a competitor, but rather encouraged me to look around and think about joining them. When the time came for me to make the big decision, these were the people who gave me the confidence to move forward.

There was one geologist in particular, Joe McCullough, whom we all know as one of the most well known oil finders among our membership. Joe had an exemplary and successful career in oil & gas exploration until his retirement from Carl Oil, Inc. After making many significant discoveries I became acquainted with Joe through our church and family. We both served as officers of the A & M Club and the Geological Society and were founders of St. Pius X Catholic Church. We became very good friends. Our families were close, and when the time came for me to make a career change Joe was my number one advocate. He arranged a number of interviews, and I am sure he was instrumental in setting up my retainer with Bernard Dietz.

During my first year as an independent I did not have to have a second car, which I could not afford because Joe had a company car and gave me a ride to and from work everyday when he was not on company business. These rides also became mentoring sessions as Joe was an “All American Swabber”, and by the time we got down town he knew all the details about every project I was working on. I did not get any of his secrets, but he helped me greatly on how to solve my own deal problems. Ultimately this relationship became very profitable for both of us as the first three wells drilled by Carl Oil Company, after the sale of Carl Oil and Frio Drilling Company, were completed as good gas wells on deals put together by Lawley and Pedrotti. We also made some land purchases on very good terms that provided great recreation for our combined brood of nine children.

There were others as well. One day when I was busily slipping logs a landman, Everett Lawley, whom I had know casually, stepped into my office. He wanted to know if I would like to work with some data he had acquired from Alcoa Aluminum Company. It seemed that ALCOA had decided to shut down its exploration offices in Point Comfort, Texas and move everybody to Houston. Of course I jumped at the chance to explore using their regional maps that were full of leads based on a lot of single fold seismic. A lead supported by any kind of seismic data was sure to appeal to some deal buyer or promoter. This encounter led to some very successful and interesting ventures, and Everett taught me much about the independent world.

First I would develop the prospects using the Alcoa data then we would go to the county records where they showed me how to check on mineral ownership. If they were unleased they would take me to the mineral owners and try to buy reasonable leases. If successful we would borrow the bonus money from our bank, and once we had the leases tied up we would start showing the deal. Buying leases with our own money was pretty scary, but knowing that you had enough confidence in the prospect to take some of the risk yourself made deals much more salable, and thus we could ask for substantially higher interests, and a lot more cash. This system worked quite well, and we made three significant gas/condensate discoveries with nice overrides in the Calhoun/Matagorda Frio Melbourne (K-2) sand that was nearly 100 feet of very porouspermeable sand. We also turned a lot of deals based on this data as although ALCOA had first right of refusal, they did not have a drilling budget.

Everett was also well acquainted with a number of Major Company landmen and was near the top of their list when farmouts became available. Several of our prospects were developed after we knew that we could acquire the acreage from the companies on a favorable basis.

In the meantime I continued working with Bill Miller trying to sell deals to Vaughn Petroleum and even tried to integrate Lawley into a three way partnership with Bill, but the personalities did not mesh, and I finally had to choose between partnering with a geologist or a landman. Now that I better understood lease buying and controlling deals, I knew that creating new prospects was much more important than relying on land deals. Sometime in 1970, Bill’s retainer with Vaughn had been terminated, and a very successful life time partnership began, originally called Miller-Pedrotti and later named Suemaur, that lasted for over 36 years.

Bill was a prolific prospect generator and a good deal checker, so by the time we collaborated on his and my ideas we usually had a Class “A” prospect ready to show. We had our favorite places to start even though we knew they wouldn’t take the deal, but once these screeners pointed our weaknesses we would correct their objections and have de bugged a deal that was bulletproof. Both of us continued to pursue ideas that pre dated our partnership, and together we were drilling 6 to 8 wells per year, mostly dry holes of course.

Hurricane Celia that nearly wiped out Corpus Christi in 1970 was the turning point. The roof of Bill’s house was blown off during the storm. Downtown was a wreck, and our offices in the Vaughn Plaza, now the American Bank Plaza, were devastated. I was able to get into my office and salvage my wet maps and logs that I took home and hung out on the clothes line to dry. Bill was so busy with his house problems that he did not get to town until the building cleanup crew had literally taken a front end loader and dumped his entire office out through the broken window onto the parking lot six stories below. He lost all his maps, filing cabinets, desk, lamps, work tables and all his personal items.

I was sharing an office and a log library membership with Joe Uri at this time, so all three of us needed temporary offices and found a suite on the tenth floor. Bill with his great sense of humor immediately put a sign on the door “UMP Oil Company” for Uri, Miller and Pedrotti, even though we had no direct dealings with Joe. This also required us to hire our first receptionist-secretary, and we continued to share offices with Uri even after we moved “down the hill” to the Corpus Christi National Bank building on Water Street.

Surprisingly, after Bill lost all his old maps, we started finding oil and gas. Bill loved Duval County and the Queen City-Wilcox trend, and I mostly worked in the Frio-Vicksburg trends. We came up with a lot more Duval County deals than anywhere else. One reason was that Mobil had the entire Duval County Ranch (100,000 acres) held by production under a lease, dating back to the 1930’s, that required the drilling of a well every 90 days. Bill focused on this area, and we had a standing farmout request so that any time Mobil did not have a location ready, we were first in line. I don’t know how many wells we drilled to save Mobil’s lease, but after three discoveries in a row we were cut off from any more farmouts.

We also pioneered the Olmos-Escondido trend in Western Webb County. Two discoveries led us that far out of our usual exploration areas: Las Tiendas, a shallow gas field found by Dan Hughes and Tom Walsh, an Escondido gas field developed by John Hada. This meant that there was now a gas market in the area, and all we did was look at the old Edwards dry holes. Both the Olmos (we called it the almost sand) and the Escondido, though thin, were obviously passed up pays in these wells. We ended up with interests in a dozen of these wells, but due to the low production volumes and small overrides, we missed the big play that was developed by Bill Colson and Bob Rowlings on a lease that we turned to Bill Colson. They eventually extended this play all the way from Encinal to the Mexico border, but we were not included.

My biggest challenge in our new partnership was to convince Bill, who was considerably more conservative with his money than I, that we should buy our own leases. Our first effort was so financially rewarding, even though the well ended up dry, that we never again asked others to front our lease acquisitions. This worked well until we finally realized that the promoters buying our deals were getting the big interests and making all the money. So our next big step was to move out of the override business into the working interest side. This also took a lot of courage. Neither of us had any engineering experience, but Bill had a good friend, Frank Forester a petroleum engineer with a lot of well site experience, who agreed to consult for us and handle the drilling. We would develop a prospect, get three drilling contractors to give us a turnkey bid through the log, and then we would operate the well to either casing point or usually plugging.

We doubled the price of the acreage as a finders fee, carved out any overrides the deal would stand, used the highest drilling bid, and then we would sell three quarters of the interest based on one third for a quarter. Once the deal was sold we would contract for the cheapest bid and pocket the profit. This enabled us to cover overhead if the well was dry, but if productive we would have enough cash to cover our one quarter of the completion costs. We had to have good prospects to accomplish this, but as I said, by now we knew what type of deals would sell and which ones to avoid.

Now that we were putting our deals together, buying our own leases, drawing some of our own agreements and operating our wildcat wells to casing point, I began to consider us more than “Geologists”, so I started thinking of us as “Wildcatters” and maybe even “Oil Men”.

Next month: Part V - “The Roaring 70’s”

Dan Pedrotti
Geologist


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Part III - Becoming an Independent Geologist

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.

My first two weeks as an independent housed in an office provided by Texas Oil & Gas were rather exciting. I was learning to use the Log Library, how to read and copy scout tickets from microfilm and where to find maps and logs. I was deluged by independent operators who wanted to make sure that I knew that if I had any Texaco secrets they would be more than happy to have me share them. I developed a great sense of judgment of people during these days as I felt some of them might want to take advantage of my ideas. Most, however, turned out to be nice guys and wanted to help me get started. Those days turned out to be some of the best times of my life as I was able to work as long as I wanted, and I never lost a minutes’ night sleep despite the risky position I had created for my family.

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”

Dan Pedrotti
Geologist


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Part II - 1958-1965

My first stop on my 50 year career, during the last week of February 1958, was The Texas Company Division Offices in Houston for orientation and processing. I also visited the Houston District Office where the geologists I met laughed when I said I was going to Corpus Christi. Several of them had been promised transfers to Corpus that had never materialized, however the following Monday we were on our way to Corpus Christi as promised.

Corpus Christi was definitely an oil town in 1958. It was the hub for oil & gas exploration in South Texas, and every major oil company had complete exploration offices here including geology, geophysics, land, scouting, well spotters and in some cases engineering. There were also many independent companies and a number of independent geologists busily trying to compete with the Majors.

Regional maps, scout tickets and log files were our main tools for exploration with some analog seismic that was of a rather primitive vintage. Every major company maintained a complete set of well files, and a set of scout tickets for each county in Railroad Commission Districts 1, 2 & 4 and some also carried District 3. These tickets were updated each week after “Scout check”. Log libraries, available to independents, had the old tickets on microfilm, a fair collection of logs, county maps and a subscription to Rinehart’s weekly drilling reports. The local paper carried a fairly complete daily report of new locations, completions and significant oil related activity, however it was important for independents to know someone from the majors where they could swab tight logs and get the latest scout ticket data.

By the late 50’s and through the 60,s, with the level of technical knowledge and procedures, few on shore oil fields large enough to attract the majors were to be found, except on the King Ranch. Natural gas was barely economical, and there were three factors that made exploration viable and exciting despite low prices and few elephant size prospects that were successful. These were proration, a maximum income tax bracket of 90 percent coupled with the full write off of intangible drilling costs and the 27.5 percentage depletion allowance.

Proration was important because each month the Texas Railroad Commission would put out the schedule of how many days you could produce an oil well at full allowable, that was set based on depth of production. At this time it was usually 10 to 12 days, which greatly limited old oil wells. As an incentive to encourage new exploration, a rule was adopted that allowed newly discovered oil fields to produce full allowable every day for the first 18 months or until the fifth well was completed in the reservoir. Even at $3.00 per barrel the low cost of drilling and completing made new oil discoveries payout quickly and quite profitable. Finding wildcat and step out prospects was thus very exciting and rewarding for both majors and independents.

The 90 percent tax bracket coupled with the write off of intangible drilling costs made huge sums of capital available from wealthy easterners, Hollywood actors, pension funds and even shoe clerks eager to become oil tycoons and join their rich Texas millionaire friends. Someone in the uppermost tax bracket could literally participate in oil and gas exploration activities for ten cents on the dollar, otherwise he would be paying that ninety cents to the government in income taxes. Most of these funds came through legitimate channels, but there is no telling how large the promotion was on the individual investor after overrides to the generator, carries by the prospect developers and operators, commissions to brokers and kick backs to promoters. At any rate drilling activity continued at a brusque rate.

The depletion allowance of 27.5 percent provided for in the tax code, commonly referred to as a “loop hole” and despised by liberal congressmen from the eastern nonproducing states allowed the producer to recapture capital from a depleting asset in order to continue exploration activities to replace reserves that he had already produced. This was a very important economical incentive in these times of low prices, proration and shortage of pipe lines for gas production. It was also fair and similar to deprecation schedules that allowed manufacturers to provide capital for outdated and worn out equipment. So this is the economic climate and challenges in our industry as I began my life long career as an exploration geologist, trying to find oil and gas in South Texas.

Our offices (The Texas Company) were on the 15th floor of the Wilson Tower and except for the District Geologist who had an office with a door, consisted of open cubicles with each geologist assigned a drafting table and a stool. Fortunately shortly after I arrived, The Texas Company merged with Seaboard, and we moved to the Sun-Seaboard building where two geologists shared a real office with desks, chairs and drafting table. Most of the Seaboard people declined to work for The Texas Company, so we soon had new recruits from college coming to work with us.

Although South Texas Onshore was bursting with activity, few oil discoveries were being made that were of significance to the Majors except by Humble on the King Ranch. There were still big land plays, and a lot of analog seismic was being shot. Quiet a few wildcats were drilled, but very little success was achieved. Since I started out working the Jackson-Frio strand line trends, our goal was to find another field similar to Prado Field that had recently been discovered in Jim Hog County. Incidentally this was the last major shallow oil field found in South Texas until much later when Big Wells Field was found by Sun Oil Company in Dimmit County of RR District 1. I was soon moved to working the Wilcox trend across Bee, Live Oak and Duval counties where our Company was conducting a regional seismic project.

By 1962 our district exploration office consisted of nine geologists, one geophysicist and a district geologist. Four of these were assigned to exploitation of older producing properties and the development of the few wildcat discoveries that were made. I can recall only two decent discoveries made by our district prior to 1965 – Vicksburg gas in the Encinitas Field of Brooks County and Miocene gas at Holly Beach Field in Calhoun County. Some significant Vicksburg production was found around the flanks of Driscoll Field in Nueces County. The Wilcox trend was still being evaluated by seismic.

Gas transmission lines were very sparse, especially in the western counties of District 4, despite the development around the big inch line that ran from Zapata County to the eastern seaboard. Intrastate gas marketing was tightly controlled by the FPC, and the few transmission companies were able to set very low prices and restrict allowables. These companies also demanded long term fixed price contracts that really became onerous when marketing conditions got better and demand increased. The discovery of natural gas at the Thompsonville Field in northwestern Jim Hogg County, not only sparked interest in the Wilcox trend but promised the development of much needed pipeline development.

I inherited the job of seismic coordinator of the Wilcox project when its leader, Jim Eiffert, was transferred to the Houston District Office. I also became manager of our portion of a regional study of the Wilcox structure and stratigraphy that extended from the Louisiana border to the Rio Grande River, our Border with Mexico.

Working conditions for me at Texaco were very satisfactory, and I got to drill quiet a few wells. In fact I drilled my first well within three months of my arrival in Corpus Christi. Of course it was a dry hole, but I knew I was on the way to succeeding in my life’s ambition. However after five years of a few meager raises, I realized that out of some fifteen or twenty fellow geologists who had worked with me in our offices in Corpus only one had got promoted to District Geologist. There were numerous side transfers to other districts and staff jobs, but only one genuine promotion so I decided to look on the other side of the fence.

During my first interview with an independent company, I became convinced that I was not ready for the independent world when I saw their geologists scrambling for information using a microfilm reader to copy well information that was so readily available to me at Texaco. I wasn’t sure a career change was in the cards for me, but I knew that I needed to become more acquainted with other independent geologists and how they worked, gathered information and put prospects together. My involvement with the Corpus Christi Geological Society thus became very significant. Then on a fateful day in September of 1965 my decision was made for me. I got a call from the Division Geologist inviting me to move to Houston to be a district geologist in a newly formed Texas Offshore District. My response was “Is that THE District Geologist?” His reply was no, you will be working for a District Geologist coming from New Orleans. I replied I would have to think about that.

After talking this situation over with Carolyn and several of my respected friends in the independent world the decision was made to stay in Corpus Christi. I immediately took two weeks vacation and started looking for a job. Well as you might expect, there was not one single opening for a geologist with seven years major company experience (deja vu). I was offered a job by Tenneco, but decided that was like jumping out of the frying pan into the fire, so I turned it down and opened an office in Vaughn Plaza building (now The American Bank Plaza), joined a log library and became an independent geologist. I did manage a small six month retainer with Texas Oil & Gas, working for Bernard Dietz, that provided bean money for my family.

In our next issue I will describe my perceptions of the independent world in the late 60’s.

Dan Pedrotti
Geologist


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Part I - Introduction

From my 50 years as a geologist exploring for oil and gas I have been able to notice that dramatic changes in our exploration efforts and techniques, especially for independents, occur at approximately ten year intervals. In this issue I will tell you a little bit about me and how I came to Corpus Christi, and in subsequent installments I will try to give you my perceptions as I saw our industry evolve from 1958 to 2008.

When I graduated from Texas A&M with a Bachelor of Science Degree in Geology the Korean War was winding down, and our business was in one of its slumps. Out of our class of thirty-five geology graduates less than 15% received job offers from Major Companies, and I being in the exact middle of my class with an obligation to enter the Air Force in September found very little interest from potential employers. In other words I couldn’t get a job in the oil industry. I actually wasn’t called up until November 6th, but that was too late.

While doing my tour in the Air Force and becoming a fighter pilot, President Eisenhower ended the Korean War. We tigers, who were looking forward to air-to-air combat in the supersonic F-86s against the Russian Mig-15s were offered the option of signing up for three more years or taking a desk job at some Air Force Base in the Continental United States. I was very disappointed, but I did not feel that I could wait three more years to see if I could realize my dream of becoming a petroleum geologist. I learned that a job was open at Lackland Air Force Base in San Antonio where 10 jet fighters were available for our use at any time we needed a break and to insure that we kept up our flying skills. This was only 150 miles from where my fiancée, Carolyn, was living, so my choice was pretty obvious.

In the Summer of 1956, when my three year tour of duty with the Air Force was coming to an end, the Air Force was heavily lobbing their fighter Pilots with College Degrees to stay on with them. I had to tell my commanding officer that I started out to be a petroleum geologist and that I had to find out if I could become one, but if it didn’t work out I’d be back to see him. Little did I realize that sputnik was just a year away, and the United States would be needing a geologist to go to the moon. As a rated jet pilot with a degree in geology, who knows I might have been chosen to become an Astronaut.

By now I have a wife and new baby girl, born on July 4, 1956, and no job prospects, so I made a trip back to the Texas A&M Geology Department to see what chances I had to pursue my life’s goal.

I met with Mr. Shirly Lynch, head of the department, who knew me from my undergraduate days. His first words to me were “come back here and get a Master’s Degree and I’ll get you a job that pays $100.00 more a month than you can get with a Bachelors Degree. I explained my family situation, and that I had no means of support except some bonds I had purchased while in the Air Force and that I was getting out in November and couldn’t get the GI bill money until I was fully enrolled. No problem, Mr. Lynch informed me-- he would let me take seven hours, and since I would be making up for the first half of the semester he would count it as a full load and get approval for me to start getting paid in November. On November 8th I was back in college taking courses in petroleum geology and planning my thesis.

The job market in our industry was pretty good in 1956 probably due to uncertainties in the Middle East caused by the Suez Canal crisis, so we were pretty enthused. My course work went well, and in the summer of 1957 I worked on my thesis, a mapping project in Grimes County involving the Jackson and Catahoula formations that outcropped in the map area. Determined to finish up by the end of the fall semester (February 1958), I worked diligently – walking the creeks, killing snakes and constantly being chewed on by seed ticks, chiggers and every bug you could imagine. By September my mapping was complete and Carolyn, then 7 months pregnant with our second child sat on a pillow and typed three drafts of my thesis on a portable Remington typewriter with three carbons.

By fall of 1957 the job market was starting to get a bit shaky, but with the end of my degree in sight I was able to interview a number of oil companies and my first offer came from The Texas Company, later to become Texaco, Inc. The salary of $550.00 per month sounded huge, and they wanted me in Corpus Christi to work the Jackson and Yegua strandline trends due to the mapping of these formations that I did for my thesis. It didn’t take us long to make up our minds to accept, but two weeks later I did receive an offer from Exxon to work in Oklahoma for a slightly higher salary. I decided that I had already made a commitment and would not go back on my word. Incidentally my classmates who finished in May had a very difficult time finding jobs in the Oil Industry.

In February 1958 after completing all post graduate studies and an accepted thesis in only 14 months, I received my Masters Degree in Geology. So, with a job as Junior Geologist with the Texas Company, Carolyn and our two daughters’ ages 2 months and a year and a half, headed for Corpus Christi where we stayed and hoped that I could succeed as a geologist.

In the next issue I will tell you more about my perceptions of exploration techniques and conditions in the industry as I started my lifelong career.

Dan Pedrotti
Geologist


 

Last Updated January 27th, 2010
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