Gamble in The Devil's Chalk. Caleb Pirtle III
and the ultimate report indicated that oil and gas reserves were much lower than those previous projections developed by the industry.
His recommendation echoed Ray Holifield’s original warning. LaRue told Irv Deal that Windsor/U.S. should immediately cease all drilling operations in the Pearsall field. Good money had no reason to go in a hole that had already swallowed the bad.
Maybe the field was somewhat worse than Max Williams believed it was, and the economics of drilling had all the earmarks of a funeral. Many an oilman left the pipes in the ground for a salvage company, turned his back on the holes, and rolled out of town. The wells that he and Deal had gambled on in Pearsall had managed to give each of them back only thirty thousand barrels of oil. It was time to look somewhere else.
The dreaded Austin Chalk had struck back once more. Ray Holifield understood the insanity of it all. Irv Deal and Max Williams had fallen victim to the chalk, and he was quick to remind them that their venture in Pearsall had been against his advice and consent. The oil patch, even on good days, had always been a bitter gamble, but Holifield believed that, in the right field, he had the ability to greatly reduce the odds and raise their chances for success.
Now and again, Max Williams would hear someone mention the big chalk well that had been producing several hundred barrels of oil a day for the last several years. Never been one quite like it, the rumors said. In cafes, around rigs, on street corners, beneath the neon sign of a Saturday night bar and grill, across a plate of barbecue ribs, at the desks of service companies, on the nearest pay phone, somebody, it seemed, was always talking about the big chalk well.
Must be a phantom well, Williams thought. Everybody knew about it. Nobody knew exactly where it was located, had taken the time to find it, or thought it was the harbinger of a major field. Everybody knew how much oil it was producing. Nobody remembered who had drilled it. Then again, Max Williams realized that rumors, both fact and fiction, ran rampant in the oil patch, any oil patch.
He and Clayton Childress had sat in roadside cafes on the edge of the Fort Worth Basin and overheard roughnecks, roustabouts, and tool pushers talking about the shallow wells that Windsor/U.S. had in the basin. He found out whether they were good or bad before he ever finished drilling them. Somebody always had an opinion that he passed off for gospel. After awhile, Williams did not believe any of the wild rumors. And, yet, he could not forget about the big chalk well. It was of mythical proportions, growing bigger and better with each new story that crept its way across Pearsall.
It was vital to ferret out the facts, he knew. Rumors were generally always based on the undertow of outlandish exaggerations, and a man could get in serious trouble if he wasted too much of his money chasing rumors that did not exist. He turned to Holifield, who sat hunched over a plate of enchiladas one night, and said, “We need to find us that big chalk well. If it’s paying off as good as everybody around here claims it is, we should locate the well and see if we can figure out why it’s making such a good payday.”
Finding it should be no problem, Holifield said. Neither man would have to leave his office. All they had to do was start rummaging through those monthly reports sent out by the Texas Railroad Commission. It listed all of the wells in the state, their production, and their locations. The two men spread a map on the table and plotted all of the wells in the Austin Chalk trend. Ray Holifield agreed to start down south on the border in Maverick County and move northward. Williams chose to begin working his way back through East Texas and check the wells that edged down toward Pearsall. If the big chalk well had been drilled anywhere in the trend, they should be able to determine exactly where it had been positioned – city, county, hog pasture, farmland, dog run – wherever it might be.
The chalk remained an enigma wrapped in a riddle. Max Williams could keep on making nickel and dime wells, but suddenly mediocre wells weren’t good enough. Others might want to throw away their time just talking about the big chalk well. As if on a Quixotic quest, he and Ray Holifield were determined to find it. The windmills wouldn’t get in their way.
Terry Moore had worked with Max Williams as an agent for McClennahan, and when real estate fell into a deep slumber, he took his inordinate talent for salesmanship and moved into the oil game as a promoter and operator. Moore was no stranger to the risks and rewards of investing, and he considered himself a deal maker. He asked Williams, “Do you by any chance know Ted Clifford?”
“I can’t say that I do.”
“Well, he knows about your leases down in Pearsall, and he’d like to talk to you.”
Max Williams grinned. “I’ll talk to anyone,” he said softly. “What does Ted have in mind?”
“Ted wants to make a deal on your Pearsall acreage.”
“What kind of deal?”
“That’s between you and Ted.”
Ted Clifford was a Schedule D operator, which meant that, legally, he had to register with the Securities Commission before he could send out mailings or make calls in an effort to raise money. By registering, however, he was allowed to call on as many investors as it took to raise money as long as every aspect of the investment was included in the prospectus, including the pitfalls, the risks, and the uncertainties associated with oil exploration. Schedule D operators made sure that their brochures and phone calls pointed out the hard truth of it all. The investment has no relationship to the ultimate cost of the well. This is a very speculative venture. The odds of making money are slim at best. They also duly listed all of the best fields and best wells they had found, or at least named the great fields where they had drilled or owned a small percentage of a well, giving them the credibility and credentials they needed to be recognized as successful oil operators.
Some Schedule D operators might raise two or three times the actual cost to drill and complete a well from several hundred investors. Many of the investors bought shares for as little as five hundred dollars, which gave them less than one percent of the well, but everyone wanted to be part of an oil deal. Such Schedule D operators often ran bucket shops, single rooms full of telephones and telemarketers to man them. They placed calls from sun up to sundown, looking for small investors. The more, the better.
For many operators working on the shady side of the street, a well might indeed cost them two hundred thousand dollars to drill. By phone and by mail, tracking down hundreds of small-time, two-bit investors, they might generate a million dollars or more. It made no difference to them whether the well was good or bad. An operator had eight hundred thousand dollars he could carry to the bank.
It may not have been ethical. On some deals, it probably wasn’t even legal. Max Williams and Irv Deal scorned the practice. It gave a lot of good, honest, decent operators a bad name. They both had known for a long time that a man’s reputation might well be his greatest asset.
Terry Moore had been right when he said that Ted Clifford wanted to meet with Max Williams. Clifford was not a man who had time to waste. He had a job to do, and he was ready to get it done. He was blunt. He was up front. He never beat around the bush. “How many locations do you have?” he asked.
“We’ve already drilled several wells,” Williams told him. “They’re making a little money. And I have more locations if those wells turn out to be profitable.”
Clifford stared out the window and scratched his face, deep in thought. He was not and had never been accused of being a dabbler in the oilfield. He wanted what was his, always trying to figure out a way to acquire what was somebody else’s as well. “Tell you what I’ll do,” he said at last. “I’ll take all of your leases, pay you fifty dollars an acre for them, and give you twenty-five percent of production. It’s good money if the wells hit, and I’m betting I can make them hit.”
Clifford caught Max Williams at exactly the right moment. He had grown weary of the day-to-day, phone call-to-phone call, time consuming chore of raising money, and he needed at least a few new investors to cover the production cost of every new well that went into the chalk. Williams kept close tabs on the total cost of drilling. He promoted but never oversold a well. He and Irv Deal took their money and their profits only when he found oil. Dry holes could ruin them. There was no financial