THE HISTORY OF GEOPHYSICAL PROSPECTING
PART FOURTEEN - FROM ALLIGATOR TO AUSTRALIA

Chapter 42  -  The Texas Company Deal and How It Grew

The year 1928 found the Louisiana Land and Exploration Company on the horns of a dilemma and squarely in the middle of a paradox. It had located nine salt domes on properly held either in fee or by lease, potentially worth several hundreds of millions of dollars. It had holdings on two other salt domes where other oil companies had footed the bill for the geophysical discovery. L. L. and E. had engaged in a prompt and diligent drilling campaign. But having put down all the tests it could finance, the Louisiana Land and Exploration Company did not have a single producing well; just a string of dry holes. What to do with its eleven salt domes, what to do?

With the company three million dollars in debt there was only one logical way out; to interest one of the major oil companies in a joint venture in which the drilling and operating costs would be carried by the major oil company. Again the interlocking directorates of Amerada and the L. L. and E. proved useful. Alfred Jacobsen, then Vice President of Amerada, had as one of his good friends, Daniel James Moran, a Texas Company Vice President in charge of exploration and production. Jacobsen first talked to Dan Moran alone. Then when Moran proved to be more than a little interested in the potentialities of the coastal salt domes belonging to the Louisiana Land and Exploration Company, Colonel Harry Thomas Klein, general counsel for the Texas Company, was drawn into their discussions.

Jacobsen originally asked for 33 ⅓% royalty, which Moran had promptly said was too high. Jacobsen next suggested that the Texas Company take half the acreage and L. L. and E. retain half the acreage. Moran would not even discuss this idea. A number of conferences later, the two Vice Presidents, with some help from the Texas legal staff and from the L. L. and E. legal staff, succeeded in arriving at a formula which seemed fair to both sides. The Texas Company would thoroughly test all of the geophysically discovered salt domes for oil and gas, bearing all the expenses of drilling and production. The Louisiana Land and Exploration Company was to receive a 25% royalty on its state leases. L. L. and E. was to receive a 25% royalty plus 8 ⅓% of the net profits on all its fee holdings. On the tenth anniversary of the signing of the contract, the Texas Company was required to turn back to the Louisiana Land and Exploration Company any salt domes on which production had not been established.

When Dan Moran took this proposition before his Executive Board there was a considerable amount of opposition. After much heated discussion the Texas Company Board appeared to be about equally divided on whether to accept the L. L. E. proposition or to reject it. At this juncture, Dan Moran told his fellow executives in the Texas Company that if they decided to reject the proposal worked out between himself and A. Jacobsen; that he would seIl it to the Marland Oil Company, of which he was on the verge of becoming President. The Texas Company thereupon accepted the deal exactly as it had been presented by Mr. Moran.

The Dallas files of E. L. De Golyer contain notes on Texas Company L. L. E. deal in De Golyer's own handwriting, which we shall reproduce in part:

"In Re LLK-Texas Deal---Oral deal made on November 12, 1928---written contract signed on December 5, 1928. Texas agreed to sublease 1,560,000 acres of marsh lands and water bottoms lying chiefly in Terrebonne Parrish and to the east in southern Louisiana.

 "No production had been developed on these lands. The bulk of the lands lay weIl to the east of any commercial production in the state of Louisiana except the relatively unimportant Sorrento Dome (which produced some 282,000 barrels in 1928) which was weIl to the north.

"The entire acreage had been shot by refraction methods and the existence of ten salt domes lying all or in part on the lands subject to the deal was indicated. This is the largest single deal involving only wildcat acreage which we have been able to find.

"Texas Company agreed to pay $1,800,000 of which $800,000 was to be recovered from one-half of any royalties which might be due; a 25% royalty; 8 ⅓% of the net profits on each dome by months, and to drill a minimum of four wells on each of the nine geophysically indicated salt domes----four wells to each known dome.“

Although the terms of the contract were involved, difficult to translate into legal language and in some ins tances somewhat unprecedented in their nature; nevertheless only slightly more than a month elapsed between the first discussion and the completed contract. Jacobsen and Moran were both adroit at cutting through the knots in complicated transactions and making them simple. With the signing of the contract, the Texas Company paid the $1,800,000 cash consideration; which was used by the Louisiana Land and Exploration Company to cancel out the $600,000 owed on first mortgage bonds, and the $1,200,000 owed on second mortgage bonds.

The Texas Company wasted no time in making a start on its drilling obligation. Two of the salt domes were brought into production in May of 1929. The Dog Lake cap-rock turned out to be sulphur instead of the usual calcium anhydride. The Bay St. Elaine salt dome produced on the 14th weIl drilled, the Dog Lake salt dome on the fourth weIl drilled.

Lake Pelto salt dome found production in the cap-rock in July, 1929; while Lake Barre salt dome established cap-rock production in September, 1929. Four wells were required at East Hackberry before production was forthcoming. The eighth weIl drilled on Caillou Island was a producer, a very good producer, making its initial flow in January, 1930. The Leeville salt dome in Lafourche Parish had been discovered by Gulf in 1928 (GRC Party #2) but L. L. E. had important acreage on the dome. The Texas Company hit oil on this salt dome in 1931 with its second weIl.

The Vermilion Bay salt dome was not established as a producer until the tenth year of the contract, 1938; it was found in the Texas Company's fourth weIl. The Texas Company drilled the first of four dry holes on the Bay Junop salt dome in 1929 and turned the dome back to the L. L. E. in 1938. Notwithstanding, the Texas Company now has production on the Bay Junop dome. The Texas Company drilled nine dry holes on the Four lsle dome and turned it back to the· L. L. E. in 1938. L. L. E. made a subsequent contract with the Superior Oil Company of California on the Four lsle dome. Superior found oil on its twelfth weIl. L. L. E. made a subsequent agreement with the Union Oil Company of California on the Bay Junop dome. Union after much drilling finally made Bay Junop an oilfield.

The Louisiana Land and Exploration Company made its deal with the Texas Company ten months before the start of the Great Depression. Some idea of the depths of despair of the investing public at that time may be deduced from the fate of the L. L. E. common stock. L. L. E. had no drilling obligations; it could ride out the Depression with someone else developing its vast resources. Yet in spite of its enviable position of financial security, the stock was selling at fifty cents a share in 1933. Louisiana Land and Exploration Company was nicknamed Lousy Lou and Lousy Annie in derision. The L. L. E. Houma office today has a patrol boat named Lousy Lou in remembrance of those hard times. The L. L. E. geophysical boats had appropriate names; "C. I.," "Ups and Downs," "Vagabond," and "Pluto" (in honor of Pluto-Le May).

Almost all of the members of the Geophysical Research Corporation at one time or another held stock in the Louisiana Land and Exploration Company. Most of them did not carry it through the Depression. One exception is Carol Rosaire, who made weIl over $100,000 on L. L. E. stock sales. On March 27, 1933, Dr. Ben B. Weatherby bought a thousand shares of L. L. E. at 5/8. It was split 3 to 1 in the 1950s and 2 to 1 in 1964. He still owns his 6,000 shares which cost him less than $650 and is now worth roughly $300,000.

The Louisiana Land and Exploration Company returned to the use of geophysics in the spring and summer of 1934, when it hired the Geophysical Service, Inc. to shoot reflections over certain areas where it held land. This reflection survey was a failure. In the autumn of 1934, L. L. E. entered into a joint interest deal with the Amerada Petroleum Corporation under which the principal reliance was placed upon the refraction method. Much of the detailing, however, was done by reflections. These Amerada-L. L. E. efforts resulted in the discovery of the Bayou des Allemands salt dome in St. Charles Parish; Raceland salt dome in Lafourche Parish, and the Lake Chicot salt dome in St. Martin Parish.

The joint Amerada-L. L. E. seismic operations continued off and on between late 1934 and early 1939. Edward O. Lane was the GRC party chief for most of this work. Robert Bills operated a second GRC party for about six months. These surveys also uncovered the Golden Meadow salt dome in Lafourche Parish but to no benefit to the Amerada. Golden Meadow was found by GRC refractions in 1934 and detailed by GRC reflections in 1937; L. L. E. then notified the Texas Company of the discovery and told them to go ahead and drill, since the acreage was covered by the 1928 contract. The Texas Company established production on Golden Meadow in 1938.

The Louisiana Land and Exploration Company holds royalty interests in the Lake Washington salt dome in Plaquemines Parish. It holds royalty interests under Pan American in the Bastian Bay salt dome in Plaquemines Parish. L. L. E. holds working interests in a number of salt domes that have been found in the open waters of the Gulf of Mexico.

Frank DeWolfe resigned his position as Vice President and Chief Geologist of the L. L. E. in 1931 to accept a teaching assignment as head of the Department of Geology at the University of Illinois. Paul Seashore took over from DeWolfe as Vice President and Chief Geologist, retiring in June of 1953. Mr. Niles R. Faulk became Chief Gelogist in 1955 and was made a Vice President of the Louisiana Land and Exploration Company in 1963. Mr. J. O. Banks is manager of the Geophysical Department which was created in 1961.