OIL & GAS: A Word to the Wise

OIL & GAS

“People have told me for years there is no more opportunity left. They said a man is stymied; all the good things had been taken up. But we’ve parlayed an idea in six or seven years into millions.” So said Dallas Geologist John A. Jackson last week as the biggest uncommitted natural-gas field in the U.S. was opened up by the Federal Power Commission. FPC approved the sale of 105 million cu. ft. of gas daily in the Wise County area of northern Texas to the Natural Gas Pipeline Co. of America, one of the biggest U.S. gas distributors. To get the gas from Wise County to its own main line Fritch, Texas, Natural Gas will spend $32.1 million to build a 350-mile pipeline.

Well, Well, Well. Geologist Jackson first realized the potential of Wise County in 1948 while working as a consultant for oil companies drilling there. While many of the wells did not produce oil, they had gas. But no one knew whether there was enough gas in the field to make it worthwhile to build a pipeline. Nevertheless, Jackson went to work to get the gas to market, persuaded a Wise County rancher to give him an 18-month option to drill three wells.

Jackson teamed up with Ellison Mills, a Dallas drilling contractor, got $60,000 from Wise County landowners willing to take a chance. The first well came in with an estimated reserve of more than 5 billion cu. ft. of gas, worth about $500,000. But since the drillers had no customer for the gas, banks refused to lend money to drill the other two wells. Lone Star Gas, which also had gas wells in Wise County, offered to buy the well for a mere $15,000, which Jackson refused. Discouraged, he went back to his consulting work as a geologist.

The Big Break. The big break came a year later. Explains Jackson: “I was in Lubbock, Texas, and got into a conversation with a lease man in the coffee shop and told him about my Wise County deal. He mentioned the deal to a Denver friend who then mentioned it in a conversation with an associate in Tulsa on the phone the next day, and the man in Tulsa got in touch with a Chicago bookie, who had put money into oil, and happened to be in Houston. It all didn’t take over three days, and the bookie called me in Dallas.

The bookie hired Christie, Mitchell and Mitchell, Houston oil operators, to check on the deal. They liked it so much that they bought out the bookie, capitalized the operation for $10 million, put up mostly by C.M. & M., Waterford Oil Co., Riddell Petroleum Corp. and Houston C Financier Bob Smith (TIME, May 2 1954), guaranteed Jackson and Miles 5% of the new venture’s gross. In two years Jackson and Miles leased 285,000 acres in the Wise County area, brought in 110 gas wells and 57 oil wells. They had a spectacular average of ten productive wells for every dry hole, and have drilled on only one-seventh of their leased land.

The Neighborly Way. But when C.M. & M. was ready to sell to Natural Gas Pipeline and asked FPC approval, they ran into trouble. Rival Lone Star Gas fought the case before FPC for so long that C.M. & M. was faced with the expiration of its land leases upon which drilling had not started, thus might not have big enough gas potential to satisfy FPC that the yield could supply gas for a long enough period. C.M. & M.’s answer was to throw a $5,000 chicken barbecue last summer for Wise County landowners, and explain in neighborly fashion why the sales of gas on their land was being held up. The disgruntled voices of Wise County were heard all the way to Washington, and last week the FPC granted its O.K.

Thanks to Jackson’s plugging of his idea, C.M. & M. should make about $150 million out of the gas fields. The landowners of Wise County will pick up about $1,000,000 a year in royalty payments. For their 5% interest, Partners Jackson and Miles will get $200,000 a year apiece for at least the next 20 years.