The San Francisco call., 1910-09-28
AGENCY PUTS
THE MINIMUM
AT 50 CENTS
Terms OF Big Contract With
the Associated Soon TO
Be Announced
Union Lays Plans for a Bond
Issue Which May Reach
Sz5,0G0,OOO

With the opening Of the last quarter
of.the year the oil situation IN Califor-
- MIA has passed successfully through a
p critical era. Danger Of demoraliza-
=. tion has been averted. A broader in
= dustry on a better basis is assured. For
a time the sudden expansion of supply
and the lick Of adequate Transports
tion and marketing facilities cast a
shadow over the business. The adj
5ustment has now come.
The pending arrangements between
the Associated and the independent
- producers have served TO melt the
mists. Up 10 the present neither party
TO the transaction has announced its
terms. Each. however. is proceeding
with fun confidence of its ratification.
This much is pretty generally ac
cepted. that the amount to be deliv-
cred viii be between 100000 and TO-
100000 barrels; that the price will not
be less than 50 cents a barrel.
BASIS OF CERTIFICATES
The storage certificates of the agency
are being made out with a minimum
guarantee Of 35 cents That is assur-
ance sufficient that the contract with
the Associated will not be lower. 1t
az final figure of ST11 cents
IA may be stated in some quarters
that 371z cents is not a favorable fig
ure. Under some circumstances it
is not Under others il is. AS an emer-
gencv price il Is a good bargain.
For some time now so cents has been
regarded as q minimum price at the
well. Under normal conditions the
quotation should range higher. A dis
tinction must be made, however. be-
11o-
product. Some wells will not pay to
. pump at 375k cents. Many gushens
would nav big money at 10 cents bar
rel Al Of the existing circumstances
: must be taken into account. The
b. agency has been forced to handle the
output Of half a dozen gushers Of tre-
mendous proportions. Under the cir
cGmstsnces members of the agency
are inclined TO regard the negotiations
with satisfaction.
ANOTHER PIPE LINE PLAN
with the preparation OF plans on
the part Of the Associated to handle
' the agency oil there have been reports
that another pipe line from the Mid
. way to tidewater was under considera-
rion. It is stated that such a line
would parallel the one already laid by
the producers.
o.: Another factor in the situation which
promises to allay apprehension lies in
the clear presentation by Clifford Pin
chot OF the proper method of treating
the oil measures. Pinchot went into
the field. as he said, totally unfamiliar
with the problem. He looked over the
territory. formed his conclusion and
announced his findings without circum-
locution.
- Pinchot. il is true. holds no official
position. but as the dominant influence
in the National Conservation associa-
tion he is able 10 do more for the oil
men than any other citizen in private
life.
RIGHTS OF OPERATORS
Pinchot believes that those operators
!: who have settled upon the land and
: have proceeded with development to
discovery in good faith should be pro-
tected in their holdings. That is just
what the California oil operators have
been contending for and which, IN some
official quarters; there has been dispo-
sition TO deny them.
: Pinchot believes further that a small
royalty should be paid TO the govern
.Tnent. The majority Of California op-
). orators will agree with him in this. He
D.: believes further that the government
should leave nothing undone to take
from the hands Of the Southern Pacific
the vast petroleum acreage to which 1t
was never intended that IT should have
title. There viii be nothing but the
fullest approval in California Of this
sentiment.
The note Of expansion has been
sounded again by the Union oil COM
psny, which has made tentative an
nouncement of a big bond issue.
NEEDS FOR DEVELOPMENT
A circular issued by the company
makes reference to the need of funds
= 70 develop the immense holdings and
mentions the amount as $2o.OO0.OOO or
s25 600, 600. The circular says in part:
To only fairly develop our proven
ell territory would require the
drilling Of at least ], 900 wells, which
viii cost on 3n.1 an ayeTagss df sso S6S sso;SSo S6S
The purchase of lands in the new
oil fields, the extension Of pipe lines
and refinery systems, increases to
feet. additional marketing sta
tions, etc, would involve an in
vestment Of many millions addi-
tional. These investments would
necessarily be distributed through
TO attempt TO provide for all of
this development from the COM
o.. spsny's earnings would not only re-
tsrd them, but would also limit
the company's ability to pay to it's
stock holders as large percentage
OF its earnings in dividends as
they have right to expect under
our expressed policy to so pay so
per cent of net earnings. We have,
therefore, been considering the
pTacticabiiity Of a large bond is
sue, say, from $20,000,000 to $25,-
O0OO OO0 for IS years at per cent,
these bonds TO be offered for sale
only as money may be required.
These bonds would absorb the is
sues of the auxiliary companies
which our company has guaranteed.
This issue, therefore, would cover
the entire bonded Indebtedness of
our company, and should neces-
sarly be for a large amount,
we could not do further financing
along this line while these bonds
were outstanding.
The letter adds that the earnings of
the Union oil company for 1910 ex-
ceeded those of 1903 by approximately
S500.ooO. 1t is stated that an increase
in the dividend rate has not been
deemed advisable. At the same time
the announcement is made that the
Union has developed only per cent
OF its holdings.