Business & Finance: Midwest Oil

In Clay County, Ill., on a farm for which the county might have been named, 60-year-old Bunyan Travis lived and labored, sweating in the noonday and sometimes cursing the bread he earned, for Bunyan’s acres were scrawny with drought and his back was bad with rheumatism. Finally he got him a cane to hobble around on. Chance came to Farmer Travis last spring when a gang of husky young men from the Southwest put up a derrick on his land and began to drill for oil. On May 23 they brought in an oil well which produced nearly 3,000 barrels the first 24 hours. That day Farmer Travis threw away his cane.

All summer through southern Illinois such tales as this have been the fresh coin of conversation in beer joints, barber shops, boarding houses, depots and town halls, adding their drawled excitement to the bustle and clank of an authentic oil boom. Farmers had their first intimation of it early last year when Chicago’s great Pure Oil Co. started methodically buying oil rights on acre after acre in the country east and south of Vandalia.

By last week 115 test wells were drilling in 21 counties of Illinois’ central basin and 75 wells were producing 10,000 barrels a day in Clay, Marion and Richland counties. First strike in Richland was the Ohio Oil Co.’s “Arbuthnot No. 1,” brought in fortnight ago with a flow of 2,561 barrels the first day, which seemed to prove a 30-mi. extension of the known producing area. Close-mouthed oilmen now predict that the first year’s production from Illinois’ new fields will be between 3,000,000 and 4,000,000 barrels.

This is a small tributary indeed to the vast flow from U. S. oil fields, which last week for the 17th time since January 1 broke all records with an average production of 3,651,000 barrels per day. But for Illinois it is a revival of hopes forgotten during the quarter-century when the State’s oil production dwindled from a peak of 33,000,000 barrels in 1910 to a scant 4,000,000 last year in the old pumping grounds near the Indiana border. Most active of the new fields is the Patoka pool south of Vandalia, where a smart, young Texas company, Adams Oil & Gas, got in first and now has more than half of the 20 producing wells. Richest potential producer is Pure Oil Co., locally known as “The Pure,” which brought in the well on Bunyan Travis’ farm and now holds oil rights on 282,000 acres.

The Pure. In a scientific industry, Pure Oil Co. has long distinguished itself for the success of its geologists. When the first commercial oil well was drilled in Michigan twelve years ago, Pure Oil men conferred with engineers of Dow Chemical Co. (TIME, Dec. 28), drew maps from salt well records showing probable oil structures near Mt. Pleasant. After buying leases on 500,000 Michigan acres the company proceeded to open up one of the big fields which have since made oil Michigan’s third most important industry.

For Pure Oil Co., oil sources in Illinois have the same advantage as those in Michigan: nearness to the company’s biggest retail market. They are also valuable for another reason. Pure Oil’s principal field is the Van Field in East Texas, 80% of which it owns. Last year when Texas production seemed excessive the Texas Railroad Commission ordered a reduction in the allowable for the Van Field, compelling Pure Oil to buy 11,000,000 barrels from other producers—twice as much as the year before. As a result Pure Oil’s profit for 1936, $7,658,000 was nearly $500,000 less than in 1935. This year, though Texas has raised its proration. Pure Oil needs all the new production it can get to meet the greatly increased demand.

To rebuild its refineries, to reduce its fixed charges by paying off bank loans of $28,000,000 and retiring $8,000,000 in 8% preferred stock, to provide working capital, and to pay for the development of its new producing properties. Pure Oil Co. last week filed with the Securities & Exchange Commission an amended registration statement for $44,244,000 worth of new preferred, dividend rate still undetermined, to be offered first to holders of the company’s 3,981,990 shares of outstanding common at the rate of one to nine.

Pure Oil Co.’s president since 1924 has been Henry May Dawes, solemn brother of Charles and Rufus, and its chairman is genial, stout Brother Beman. Least known of the Dawes boys, Beman is a great vacationist in Florida and Canada, leaves active direction of the company to hardworking Brother Henry. At his desk on the 22nd floor of Chicago’s Pure Oil building every morning promptly at nine, President Dawes rarely gets away for golf except on weekends. An amateur of Civil War history and photography, he is a great friend of Cartoonist John McCutcheon and Illinois’ onetime Governor Lowden, annoys some people by preserving a dead pan when he tells funny stories.