Deals That Made the Permian

The Oct. 22, 1920, edition of the Breckenridge American newspaper gives a snapshot of pre-Depression Era Texas on the eve of great change in West Texas.

A proverbial loaf of bread cost 10 cents. Dr. Stephen E. Smith advertised his general surgery practice, which offered a cure for piles “without the knife.” Help wanted ads sought young ladies for work at Southwestern Bell Telephone Co.

In another advertisement, an oil company solicited investors, cajoling them not to miss an opportunity that “will last but a few days. Over half way down the hole.”

On an inside page, the paper ran a story about two wells that, improbably, had produced oil in Mitchell County, Texas. Geologists, the article said, had presumed that a drill would never be able to penetrate the oil sands in the county. They were estimated to be up to 4,500 feet thick in the “Permian formation.”

At the time, the Mitchell County oil discovery was like the breaking of the sound barrier. At a cost of roughly $30,000—a time when the median price for a home in Dallas was $5,550—oil was discovered.

As the Breckenridge newspaper put it, “if this theory [of no oil in West Texas] actually existed in the minds of the competent geologists, it has been thoroughly disproven.”

Where there is oil, deals are sure to follow.

Since the first oil discovery, hundreds of transactions have built up, torn down and rearranged the operator landscape. While the details of the earliest Permian deals are hard to piece together, or lost to history altogether, in the past century some of the largest transactions in the oil and gas industry have touched or been directly tied to the Permian.

The advent of shale and hydraulic fracturing only served to further whet the appetites of the oil and gas fraternity.

Roughly six decades later, in February 1984, Texaco Inc. announced what was then the largest corporate transaction in U.S. history, buying Getty Oil Co. from family members for $10.1 billion (roughly $25 billion in 2019 dollars). Getty itself had an office in Midland, Texas.

Though Texaco’s interests were far-flung, it was Texaco (in 1920 called The Texas Co.) that leased mineral rights from plantation land owned by William H. Abrams, a railroad official, in Mitchell County. In July 1920, a key Permian discovery well—the W.H. Abrams No. 1—violently ejected oil and gas from a 2,754-foot deep well. After refinement, in a little more than five months the well’s 26,000 barrel per day production grossed $5 million, according to a 1923 publication of the Oil Trade Journal.