The black gold
Oil is one of the world market’s most important raw materials. It is used in most industries, such as in medicine, cosmetics, communication and of course as a heating source. Oil, like gas, has, since its discovery, played, and will continue to play, a significant role in the continued welfare.
Oil and gas industry in USA
Benjamin Silliman, Jr., professor and son of a very respected American researcher, was elected in 1854 by a group of businessmen. The group’s vision was to analyze and find a possible use for so-called “Rock Oil” – a way to separate liquid form animal and vegetable fat. “Rock Oil” bubbled and oozed from saltwater wells in the area around Oil Creek, a solitary wooded hill area around Northwestern Pennsylvania. “Rock Oil” was brought up from the wells using primitive methods. Either the water surface was skimmed off or a filter was lowered into the oily water and then squeezed out. The little that was extracted was for medicinal use. The group’s intention was to increase the quantity and, using chemical processes, get a liquid that could be used to light lamps. The group was optimistic. With “Rock Oil,” one would be able to take market shares from kerosene and light up farms and cities both in North America and Europe. Without knowing, they had laid the groundwork for a new era in the history of mankind.
George Bissell, considered to be the father of oil, was a lawyer and the driving force in the group. He first came in contact with “Rock Oil” in 1853. In New Orleans, he was principal and superintendent of schools but was forced to go back home because of poor health. On the way home through Northwestern Pennsylvania, he saw some of the primitive oil handling around Oil Creek. Once home in New Hampshire, he visited his old school and saw a bottle of “Rock Oil” in a workroom. Bissell knew that “Rock Oil” was used as medicine to treat headaches, toothaches, deafness, and rheumatism. It actually went under the name “Seneca Oil,” after a local Indian chief, Red Jacket, who revealed its healing powers to “the white man.” Bissell knew that the insidious black liquid was flammable but could it be used?
Bissell hired interested investors and Silliman to analyze oil both as a lighting material and lubricant. Silliman’s reputation and position were even more important for his involvement. He carried the name of one of the 1900s most respected scientists. This made it easier for the group to collect necessary capital from investors. Silliman reported on the possibility of boiling oil and producing different fractions, such as coal and hydrogen. One of these fractions contained a very high quality flammable oil. With Silliman’s report, the group had no difficulty collecting capital from other investors. Shares of stock were sold and the company became known as the Pennsylvania Rock Oil Company. Silliman purchased two hundred shares, which further strengthened confidence in the group and company.
Oil was nothing new to mankind. Its history in the Middle East stretched back to 3000BC. A substance called bitumen oozed through layers of rock towards the earth’s surface and was used in the ancient Middle East as a building material. Its use as a lighting material was however unknown. If the group could find oil in sufficient amounts, then the oil could be sold inexpensively and create serious competition with other more expensive products. Digging for oil didn’t work but perhaps there was an alternative.
Saltwater wells have been drilled in China for more than 1,500 years. Some to a depth of 3,000 feet. In 1830, the technology was imported to Europe and copied. Could this technology be used to extract oil from the ground? Even if the company had capital, it was by far not enough. Plans to pump oil out of the ground just like water were looked at as a bluff and a swindle. The banks refused to lend money so who could one turn to? Edwin L. Drake was chosen by accident. He happened to be staying at the same hotel as James Townsend, one of the investors in the Pennsylvania Rock Oil Company. James successfully convinced Edwin to buy stock in the company; in addition, Edwin’s work as a train conductor was important. It basically entitled him to free train trips, something that could be useful for someone who traveled around and made important contacts. This also became Edwin’s job at the Pennsylvania Rock Oil Company and in December 1857, Edwin arrived in Titusville in Northern Pennsylvania. A small city that grew from logging. Now the inhabitants were in debt up to their eyeballs to the local logging company that had helped the poor townspeople by paying their wages in advance. Because of this situation, Edwin received a warm welcome when he arrived. Edwin’s task was to get a deed for a land area, which didn’t cause any problems. The next step was to begin drilling for oil. This however, was not so easy.
In the spring of 1858, Edwin was back in Titusville to start the drilling expedition. At the same time, the investors in the Pennsylvania Rock Oil Company had created a new company, Seneca Oil Company, with Edwin as representative. The deeded land area was approximately three kilometers from Titusville in the Oil Creek area. A stream ran through this land from which approximately 20 liters of oil were collected per day using primitive methods. Edwin started digging by hand but was increasingly convinced that this was not the correct method. After three months, he returned to Titusville to telegraph for more money. He was now completely convinced that one had to drill for oil instead of digging for it, and for that reason, he needed employees with saltwater drilling experience. These people could be hired. Now another problem arose. These people who were hired soon disappeared or were so drunk they couldn’t do any work. A year later, in the spring of 1859, he found his man. His name was William Smith and he was a blacksmith. William took both his sons and started work making tools and soon a drilling rig was being built. It was estimated one would have to drill several hundred feet to find oil. The work was slow and the investors in New Haven started to become impatient. Finally it was just James Townsend who still believed in the expedition and he began paying the bills out of his own pocket. In late August 1859, even James started to become doubtful. In desperation, he sent money for the last time along with instructions to pay the last bills and then discontinue the expedition and return home.
Drake had not received the letter when, on August 27, the drill got caught at a depth of sixty-nine feet. It was decided that drilling be stopped until after the weekend. On Sunday, William went to see the borehole. When he looked down into the hole, he could see black liquid floating on top of the water. He took samples of the liquid and was filled with expectation. Oil had been found. When Drake arrived Monday morning, he saw William and his men standing guard around barrels full of oil. Drake attached a simple hand pump and started pumping up the oil – that same day he received the letter from James Townsend.
Rumor about the oil spread like wildfire and the number of inhabitants in the little town of Titusville multiplied overnight. The only problem now was finding enough barrels to collect the oil in. Gradually, as more wells were drilled, the supply of barrels decreased and the price of these barrels, for a period, became higher than the price of oil.
1859: Edwin Drake drills the first oil well in Titusville, Northwestern Pennsylvania.
1861: The first well with gravity is drilled in Western Pennsylvania and produces 3,000 bopd. A production increase from 450,000 bbls in 1860 to 3,000,000 bbls in 1861 leads to:
- The price of oil dropping from $10/barrel to $0.10/barrel
- American Civil War breaks out.
1865: John D. Rockefeller buys out his partner, Maurice Clark, from their jointly owned refinery. Cost: $72,500
1870: Five men, with John D. Rockefeller at the head, start Standard Oil Company
1879: Standard Oil Company controls 90% of America’s refinery capacity
1882: Thomas A. Edison demonstrates the light bulb. A very large market for the oil industry disappears.
1885: The city geologist in Pennsylvania warns that oil will soon run out.
- Specialists at Standard Oil say that the chance of still finding a large oil field is one in a hundred.
- Lima – the Indiana fields in Northwestern Ohio are discovered. In 1890 they are responsible for one-third of US oil production.
1892: Henry Ford builds his first automobile. From 1900 to 1912, almost 900,000 automobiles are sold in the USA. One huge market, entirely dependent on oil, is created.
1901: On New Year’s Day, oil is struck at 880 feet at Spindeltop in Beaumont, Southwestern Texas. The well shoots up oil 100 meters into the air. Daily production is 75,000 Bopd. The Texas oil boom is a fact. Market prices rise from $10 per acre to $900,000. The number of residents in the small town of Beaumont grows from 10,000 to 50,000 in just a couple of months.
1928: – to present: Texas is the largest producer of crude oil in the USA.
The American oil market also experienced significant growth during 1970-86. New oil drillings were carried out at a faster rate with banks as large and generous financiers. The price of oil increased and the forecasts pointed towards continued positive growth at the same time as demand for oil steadily increased. In 1986, however, the price of oil dropped, creating new opportunities to invest in oil.
The events also resulted in large oil companies being forced to sell their fields. The reason was high administration costs and insufficient oil production. This sell-off opened the door for middle-sized and small independent oil companies that could do the same work at a significantly lower cost. With their knowledge, experience, competent business partners, more efficient management and new capital, they developed, among other things, existing oil fields.
How can Swedish investors make money in the American oil industry?
With this historical background, Texas Onshore Resources, Inc., has decided to offer various oil projects with a balanced risk. With this risk diversification, there is a high degree of certainty that the invested capital combined with a high return can be achieved.
- Producing fields with a lifespan of 20 years or more in order to secure the total capital
- “Recompletion,” a process where new formations in an existing well are opened up. The cost for this procedure is relatively low and the probability that we find oil is around 80%.
- Drillings of reserves using modern technology such as 3D seismic surveys, “wellbore-control,” and such, where the probability of finding oil is around 60-90%.
Strict restrictions from American authorities
In order to do business as an operator, one must be registered and licensed with the state authority Texas Railroad Commission, RRC. This means that oil and gas extractions must be reported every month. RRC continuously checks reported numbers from sellers and buyers. If there is the least bit of suspicion of irregularities, RRC immediately seals the pumps until there is clarification.
The authorities watch over the extractions, distribution, sale and refining, following stated parameters, among other things, from an environmental standpoint. Samples are continuously taken via flyovers.
Managing someone else’s money is based on trust and respect
Texas Onshore Resources, Inc., offers a direct ownership – working interest WI – in new and existing oil and natural gas fields in the USA. This means that you, as an investor, purchase a percentage in one or more oil fields.
Texas Onshore Resources, Inc., has been a part-owner from the beginning in each project that has been offered to European investors and has therefore a joint vested interest with you, the investor. The annual dividend yield on successful projects is 10-200%.
Working interest, WI, is an excellent investment alternative. We believe this and so do our customers. More than 90% of them have invested in new projects. Simply because they are satisfied.
Competence, knowledge and contacts
Texas Onshore Resources, Inc., has an extensive network of competent operators, geologists and engineers, which is necessary when purchasing producing and new oil and natural gas fields.
In addition to outside expertise, the company has well-trained employees with much oil business experience in prospecting, financing and leadership.
The decision to buy is always based on careful analyses such as available official data from previous oil extractions and geological surveys with advanced on-site technology.
Competence, knowledge and contacts are important factors for succeeding in the oil industry. By using the market’s and our own human and technical resources in the best way, we do everything so that the projects will be profitable, long-term and safe.