- 1920s Oil Business -
The “Oil Business Is a Game for The Game” was the headline describing the oil business in Greenwood County and all of Kansas in the 1920s. This article, written in 1920, explains some of the interesting facts about the oil industry that were new to the average citizen. Three items that were needed to play this game were: brains, skill and money.
“When the average layman considers the oil industry or that part of it which ordinarily comes within his range of every-day vision he sees simply the black oil as it pours out of the pipe from the well into a tank and thence into pipelines, transforming itself into huge dividends for lucky investors.
He does not visualize the thousands of years it required for nature to manufacture this oil in her own individual way. He fails to remember the scores of intricate processes which scientists say are required before decayed matter can be transformed into a fluid which answers man’s demand. He does not visualize the thought, energy, study, work and other forces necessary to find an indication of the location of this oil hundreds or thousands of feet below the surface of the ground.
This layman forgets the hard work necessary for bringing together of sufficient money, men, means and supplies for the drilling of a test well into the earth. He does not visualize the weeks or months or even years of hard luck, or troubles, of handicaps, of temptations to “throw up the sponge.” (Slang for to acknowledge defeat) He sees only the liquid flowing out of the ground.
He does not realize that it is a game only for the persistent, for the determined and for the serious-minded. And most of all he does not sense that the greatest necessity for the drilling of wells and bringing in of producers is money-moneymoney.
It cost more to drill an oil well today than ever before. Outside of the need of brains, skill and determination it’s money that’s needed to find production now days. High prices have become an old, old story with oil men. They simply grin and bear it, knowing that all the complaining in the world won’t change things.
Everything is sky high. Supplies—when they can be obtained are usually – are usually of high price or else are of inferior quality, which jeopardizes the value of everything else used in connection with them.
Labor is high. And not one shall say that oil field labor, as an organization does not deserve every cent it receives. Skilled men, working in difficult and unpleasant situations is the oil field labor of today.
Supplies are high priced. It can’t be helped. The materials which go into the drilling of an oil well are subjected to terrific strains which test all the skill of their makers. If supplies serve oil men well and “stand up,” the oil men say nothing and are satisfied.
A dry hole means disappointment. It means tens of thousands of dollars lost.
Yet, it actually costs less to drill a dry hole than to drill a producing well, as is to be explained. It costs from $40,000 to $50,000 to drill an oil well to a depth of between 2500 and 3000 feet in a proven field, providing the operator encounters no more than the ordinary amount of trouble. These figures represent the outlay necessary to be spent except in the shallow field operations to bring in a producer according to the records of some of the larger companies. There have been cases, of course, where the cast was more than double those figures.
The drilling of a wildcat well, incidentally, is a much more expensive process than the drilling of a well in a field which has a large number of producers.
When a wildcat is drilled, the operator must establish a headquarters for his operations, which in a proved field already have been established. He will have to hire additional men to keep the test going or will have to stand for expensivedelays in the supplying of materials and tools.
He is drilling into uncertain formations and any foot of drilling may bring on an expensive caving or fishing job, may flood the hole with water, may mean weeks of delays—all of which must be paid for. He is surrounded with uncertainty, much of which is eliminated in a field with which operators are familiar.
Again, the outsider, looking in, considers the industry and he uses words or terms like “good luck” “a snap,” and “fortunate,” which may not fit well in the industry. An investigation into the industry would doubtless convince him that he needs to apply these terms elsewhere, and not as largely to the oil business.
Primarily responsible for the high cost of drilling wells is the casing cost. The average operator nowadays is glad to get pipe at any price and under any conditions, and is willing to pay a premium for it. In a well costing $30,000 to $45,000, the casing ordinarily will cost from $20,000 to $25,000, or easily half.
Of course, these figures are simply rough estimates and averages, conditions having been different in every single one of the thousands of wells which have been drilled in Kansas.
Here is the reason it is cheaper to drill a dry hole than it is to drill a producing well: that is counting only the drilling cost and not taking into consideration the oil obtained as paying for the drilling. Pipe is “pulled” from a dry test before it is abandoned—every foot of the casing possible to get out of the hole is pulled out.
That casing, as was said before is valuable; and, second- hand casing, with the present scarcity of oil well supplies, has a big prestige among operators and commands big prices.
Consequently, the casing cost in a dry hole will be discounted considerably as the operator will be able to sell it at a round figure or himself use it again. Thus, the cost of a dry hole is cut usually one-third or onefourth by getting out the casing. It is true that pipe is “pulled” in producing wells, but it is only the “big pipe.”
When a well is drilled in for a producer, one of the first things the owner has done is the removing of the fifteen, twelve, ten and eight-inch pipe. He does not need this in the well any longer as all the “strings” run the complete depths of the well, one inside another.
For the bare drilling cost of the well alone, the price probably will run around $3 a foot, while the rig will cost $2,000 and the fuel around $5,000 most likely.
Wages follows: When the contractor begins an underreaming job, he gets $80 a day from the owner of the test. Out of this, he must pay his workers. When the work of shooting, cleaning out and drilling in the wells is in progress, the contractor is allowed $55 a day, plus the wages of the men, counting a full 24 hours to a day. It usually happens that the owner wishes to be on hand while this is going on and the men therefore ordinarily spend only about twelve hours in daylight at a stretch in this work.
The whole vast scope of the industry—more than the industry: simply of oil— is just beginning to be realized by wide-awake persons. It looks like it might be the future basis for the carrying out by statesmen of new territories and political boundaries, and would step into a new phase than its ordinary commercial one.
It requires money to find it and to give it to the public which more and more is demanding it. And this oil is growing more valuable all the time, but once it was not true.
Oil today is bringing a price—the highest in the history of the business. Indeed, it is justly so, as it costs more than ever to produce it. The ordinary grade of crude oil produced by Kansas fields of fairly high gravity has brought throughout the summer and late spring of this year $3.50 a barrel. On top of this has been a considerable premium for much of the oil known as higher gravity, or lighter oil.
Kansas oil, which is of the kind ordinarily classed as “Kansas-Oklahoma” has not always drawn the present price.
In 1904, Kansas-Oklahoma oil was dragging down the immense price of sixty cents for a barrel, and even that was not the lowest level to which it sank. At the first of January in 1905, oil had sunk to forty-one cents a barrel. It stood at various similar figures for five or six years, and on the first day of January, 1910, it reached its record low price, thirty-five cents a barrel, just one-tenth what the price has been for the summer of 1920. Incidentally, although the Kansas Oklahoma oil has always been rated as of good quality as two-thirds of all the other oil produced, this was a record low price for all fields and all grades of oil between 1900 and 1920.
Following the sensational low price, in which oil development was of little account, the price at the beginning of 1911 stood at forty-four cents, the beginning of a fall which has lasted with several slight set-backs, until today. The next year the price was fifty- three and in 1913 it was 83.
In 1917, it stood at $1.62, and in 1919 at $2.25, until late in the year, when it began a great upward movement. Before the summer of 1920 had begun it was at $3.50, with many producers predicting another good increase in the fall.”
