OIL BUSINESS FULL OF PITFALLS FOR WOULD-BE INVESTOR

As a consulting engineer, specializing in reports on oil and gas properties, and as a mining geologist, Mr. Frederick Gardner Clapp has gained the reputation of being one of the foremost oil geologists in the country. During the past month the gave a series of twelve lectures in the Geological Department of the University.

One so often hears of the enormous fortunes made in the oil business that many persons come to believe that ownership of oil stock, or of an oil lease is an unfailing road to wealth. Some persons even seem to believe that an oil geologist belongs in this same category. Few persons who have not had personal experience in the oil business are aware of the pitfalls in the path of a would-be investor, or of the difficulties and dangers that must he surmounted before arriving at the goal of accrued dividends. The object of this brief paper is to advise any young man who has the oil fever to stop and calmly consider whether he will not be wiser in keeping his feet on the solid foundation of conservative business rather than to indulge in the present day fad of many college students of studying to become oil geologists.

A series of fascinating articles which appeared in a great weekly newspaper several years ago painted the north-central Texas oil fields in glowing colors. The most exaggerated successes in the early days of those fields were written up attractively, enhancing a hundred-fold the oil fever that was then sweeping Texas. In addition to many old-time operators thousands of persons hastened to Texas who knew nothing at all of the business. Enormous areas of the State were placed under lease, thousands of wells were drilled in the Ranger, Burkburnett and Desdemona fields, and skyscrapers sprang-up in Dallas and Fort Worth to furnish office space for the oil companies and lease-scalpers.

Salt Water Spoils Many Pools.

The rainbow was short-lived, however. One of the commonest natural phenomena of the oil fields is the entrance of salt water into the oil-bearing formation from the borders of a pool, encroaching more and more according as the gas pressure is released, so that in time the pool is entirely flooded and must be abandoned. Many pools in Oklahoma, Kansas, Ohio and elsewhere were doomed to early decline from this cause, and the present more serious decline of the Mexican fields arises in a similar manner. While not all oil-bearing strata contain salt water, the majority of them do; and where the strata (or "sands") are in the nature of limestone instead of being a true sand or sandstone stratum, the decline is very much greater than otherwise.

Not all oil operators realize in advance the great difference in safety of operations in regions where the productive strata consist of limestone, as in the Lima-Indiana and Mexican fields, from those that are true sandstones or sands, as in Pennsylvania, Kansas and northern Louisiana. While such is not always the case, limestone wells generally decline far more rapidly than sandstone wells. For instance, in the celebrated Ranger fields of north-central Texas, which were advertised in such glowing terms three years ago, very few of the large companies have made money, but enormous sums have beeen lost even by so-called conservative operators. Where wells "come-in" with in daily initial production of several thousand barrels per day, little likelihood exists that they will be producing more than a few barrels at the end of several months.

Much glory has been credited to the oil geologists. While, up to about ten years ago, even the large companies had little faith in the value of services rendered by an oil geologist, the pendulum has recently swung to the contrary extreme, and oil geologists have been given too much credence. Oil investors seem to have been fascinated by the romance of geology, and to have assumed in many cases that geological predictions were infallible. Of course all that the most experienced geologist can do is to give the best professional advice as to where to lease and to drill, based on his superior and scientific knowledge of the strata and of technical conditions in that particular locality. In any case, some underlying conditions must remain unknown until the "sands" are tapped by the drill. The success of operations based on geological predictions ranges all the way from 50 to 90 percent in certain oil producing States, to less than 5 percent in some parts of the Gulf Coast.

Another fallacy has been the close drilling of wells; and in one recent instance--that of the McKeesport gas field in Pennsylvania--the Topographic & Geological Survey of the Department of Internal Affairs has calculated that the investments in this field were $22,000,000, while only $2,500,000 were taken out in gas; the field having been largely exhausted in less than one year.

Geologist Needs Much Training

Another unfortunate fact is that many persons have gone at the science of geology in a half-hearted manner, either ignoring the education that a geologist must necessarily have in order to interpret conditions rightly, or by patronizing divining rod "experts", pseudo-geologists or fakirs. All university men know that it is not sufficient to call one's self a "geologist" to be one; a pains-taking study is necessary of all the fundamental branches of geology, chemistry, physics and engineering before one can even appreciate the rudiments of petroleum geology. For instance, in the case of the writer, four years in a Technical School and seven years in Government employ were necessary before he found himself proficient enough to open his office as a Consulting Petroleum Geologist, and although thirteeen years have elapsed since that stop was taken, he appreciates better every day the following remarks of Mr. David White:

"In these days, when detailed investigations of stratigraphy, structure, and sand conditions so frequently result in the discovery of new oil fields, and applause from oil companies and the public, geologists do well to walk humbly, and punctiliously to admit that the geologic principles controlling the distribution of oil and gas have as yet been discovered only in part, and that what remains yet to be learned is probably vastly more than what is already known."

One great university is credited with having graduated seventy men from its course in oil geology; at least three colleges are specializing in this science; the columns of a certain reputable trade journal contain professional cards of over fifty individuals and firms who specialize in oil geology; and the number has lately been increasing. Contrast these circumstances with the fact that the United States Geological Survey has calculated that over forty percent of the petroleum of the United States has already been taken from the ground and the great majority of our known oil fields have been discovered. It will be seen, therefore, that tremendous competition must exist for the man who takes up oil geology with the expectation of making a living by it alone. While it is true that many oil interests are expanding into foreign countries, the foreign fields are being largely monopolized by a comparatively few large companies, and the geology and position of the principal fields are becoming rapidly known. The lesson is obvious--beware of the delusion that oil geology is a sufficiently desirable profession to be entered at this late date in the history of petroleum development