How to Find Oil the Modern Way

Sinclair Oil President Edward L. Steiniger, 60, became chief executive of the nation's ninth largest oil company two years ago because he has a talent for finding oil. Supervising Venezuelan operations earlier in his 38-year career with Sinclair. Steiniger brought in 105 wells in 108 attempts during a three-year period, and located the Barinas Field that is one of the company's prime properties. Sinclair needs oil badly because it is in the uncomfortable position of owning far more refining capacity (470,000 bbl. daily) than production capacity (201,000 bbl.). Buying crude to keep its refineries cracking costs Sinclair $3 a bbl. v. $2 for oil from its own wells. Describing his company's plight, Steiniger uses a kitchen analogy: "It's like a baker with big ovens and not enough flour for his dough."

Last week Steiniger, who also has an incisive way of sizing up balance sheets, announced that Sinclair had found oil in quite another manner. For about $252 million, it agreed to buy Houston's Texas Gulf Producing Co., Sinclair's third acquisition this year. If stockholders and the Government approve, Sinclair will get added supplies of 33,500 bbl. daily from Texas Gulf fields in nine states as well as in Libya and Peru. On the lookout for still more, Steiniger will spend $80 million this year for Sinclair explorations from Canada to Somalia.

Costly Prospect. Texas Gulf was eager to sell, though earnings last year were $6,300,000 and stand to increase 40% in 1963. The company is controlled by two brothers, Chairman Gordon Reed, 63, and President Lawrence S. Reed, 58, who spent almost ten years buying and selling oil leases before they took over Texas Gulf in 1941. The Reed brothers have also been adept at oil prospecting. Their greatest strike was the 150 million bbl. Headlee Field in West Texas' Permian Basin. But that was in 1952, and the costs of finding another one like it today are staggering. The best prospects remaining are Louisiana deep holes that cost $700,000 each to bring in, or offshore wells that can cost up to $10 million each--prices only the majors can afford.

Conservative Lawrence Reed, who looks and acts more like a banker than an oil boomer, also worries that Congress will cut the oilmen's cherished 27 1/2-c- depletion allowance. "Looking ahead," says he, "we saw that for the rest of our corporate lives we'd be in a position of liquidating our U.S. reserves, spending our money overseas and paying out large dividends. Keep that up, and I have doubts what tax position Uncle Sam would someday take." The brothers advised Texas Gulf shareholders to get out while they were ahead.

Dedicated Driver. Sinclair is less sensitive to possible depletion allowance cuts since it markets oil besides producing it. Steiniger, however, has other serious worries common to the big, integrated oil companies. U.S. gasoline price wars since 1957 have chopped incomes of the majors like Sinclair, whose own crude supplies are short. But under Steiniger, Sinclair is recouping on overseas sales and petrochemicals. This year's first half earnings jumped 71% to $32 million.

Steiniger helps Sinclair's gasoline sales in even little ways: after a quarter-mile swim before breakfast at his home in Norwalk, Conn., he shuns commuter trains to ride all the way in a chauffeur-driven car to his Fifth Avenue office.

(Winters he, his wife and teen-age son and daughter live in an East Side Manhattan apartment.) At work, he puts his stamp on all details of the business. It was Steiniger who revived the dinosaur symbol to advertise Sinclair after the company became aware of persistent interest in dinosaurs among children--those Sinclair users of the future.

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