Evening star., 1924-04-26
EVERYMAN'S
INVESTMENTS
BY George T. Hughes
NINTH ARTICLE.
Oil Securities.


While the oil industry is divided
into four great branches, production.
| transportation, refining and market
ing, which may be operated separate
ly or in combination, it is the produc-
ing end that lures the public and
causes enormous losses to spectators
and so-called investors. This article,
therefore. considers only the popular
oil security, stock in oil well com.
panies. Nor do these remarks refer to
the great companies whose holdings
and resources are SO diversified, ex-
tensive and widespread geographical
ly that they have virtually all pos
sible stability The public puts little
of its oil money into these stable
companies; it prefers the long cLNlce
offered by the inefficient operator or
the hopeless chance offered by the dis
honest promoter.
OF every five wells located by hon.
est, capable oil biologists. only one
produces oil. OF every 800 wells To-
Gated by honest incompetents and by
dishonest promoters, only one pro-
duces oil. These figures are from a ma
tionallyknown oil geologist. They are
dependable.
Suppoxititi0us Cases.
Suppose the company owns land or
leases in field that is known to con-
tain oil. Boundaries of oil deposits
are not easily defined and a lease, ap-
parently fayorably located, may miss
oil entirely. This is so well known that
experienced companies frequently
checker board their leases: that is,
Hn atlo nv n enOr-
nous tract all together, but leases
smaller, scattered tracts at inter-
walls. somewhat as the black squares
appear on a checkerboard.
But suppose the producing company is
honesty promoted, drills its wells
probab 1000 to 5000 feet or deeper
and at a cost of SS to $40 foot-and
strikes oil. GusherS are not always
huge money makers. for II is expensive
to harness them and to provide storage
practicable to obtain Immediate storage
| or transportation. 1t is expensive TO
| build pipe lines and refineries.
Situation Still Uncertain.
But grant that the producing company
has successfully struck oil and obtained
an adequate out't at fair price Tor
| its production. Say, further, that the
| he d has settled down from the first
| burst of heavy production to q steady
| flow Still there are uncertainties. Every
| company in the fed is drawing oil from
| the same suppy. Prices of crude oil or
other conditions may make 1t desirable
| for a company to suspend production
| But If other companies keep on produc-
| ing the company that suspends will hnd
it's share of the oil wholly or partly
taken by the other producers when It
resumes operations. Oil deposits aren
| b ocked out, as are coal and mineral de-
posts, which the land owner or lease
ho der may go and get as IL suits his
convenience. The oil producer must get
his share while il is there to get; other
wise the other producers who are draw
ing from the same pool will take 1t all
Life of Producing Pool Uncertain
The life of a producing pool is uncer-
tain. When the pool is exhausted there
is nothing left for the stockho ders TO
scil to reimburse them for their invest
ment" Oil and mining are totally diff
ferent from industrial and utility IN
veStments. With every barrel OF oil or
tub of ore drawn to the surface the
capital of the enterprise is depleted just
to that extent. There is just that much
less oil or ore to recover and sell. Ii
there is not enough oil or ore and condl-
tions are not right so that every barrel
and every tub viii pay back, in addition
to a profit, a proportionate share or the
money put into the well or mine, then
the enterprise is a failure.
(Copyright, 1924. by Consolidated Press
Association.p