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Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, September 24, 1938, Image 4

Image and text provided by Montana Historical Society; Helena, MT

Persistent link: https://chroniclingamerica.loc.gov/lccn/sn86075103/1938-09-24/ed-1/seq-4/

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^Journal
£\onla
ESTABLISHED 1921
PUBLISHED WEEKLY
Owned and published by the Montana OU Journal, a Montana corporation
Address all communications to «18 First National Bank Building,
_ Great Falls. M ontana. O. I. DeSCHON. publisher
SUBSCRIPTION RATES:
13.00 Per Year In Advance—Canada and Foreign Subscriptions $2.50,
$1.26—6 Months. Foreign $1.76—6 Months.
Published Every Saturday.
Entered as Second Clasa Matter, April 23, 1921, at the Post Office at
Great Falls, Montana.—Under Act of March 3. 1879.
Per Year.
The Montana Oil & Mining Journal endeavors to insure the honesty
and trustworthiness of every advertisement it prints and avoid the
publication of all advertisements containing misleading statements
or claims.
ADVERTISING RATES ON APPLICATION
SOLUTION OF
PROBLEMS IS
UP TO BUYERS
The subject of proration, still fre
quently discussed among Montana
oil men, is revived in a "Memoran
dum on Proration" issued by the
Independent Petroleum Association
of America, which concludes that
the alternative of proration is rea
lization by purchasing companies
that they are required in substance
to discharge a public duty and obli
gation.
The text, which has been re
ceived by Montana directors of the
IPA, follows:
MEMORANDUM ON PROBATION
"(1) Subject to reasonable and
necessary practical limitations, Pro
ration rests upon the fundamental
proposition that each producer
each day, wherever situate, will
receive his ratable share of the
day's market and, with broad ad
justing factors taken into account
will also receive the prevailing
market price. This is of the ut
most Importance to the indepen
dent producer who is wholly de
pendent upon others for his mark
ets and the transportation of his
oil.
"(2) But in order to effectuate
this, it is necessary to have ade
quate control of
(a) Imports;
(b) Storage withdrawals;
(c) Fair and equitable allo
cations among the States;
(d) Fair and equitable allo
cations among pools within
the States;
(e) Ratable takings within
pools within the States.
"(3) But neither the State Com
pact nor State Commissioners pos
sess any power at all so far as (a),
(b), (c), and (d) are concerned.
The State Commissions may possess
only limited power so far as (e)
is concerned—which is to say that
in the opinion of some if one pur
chaser in a common pool reduces
his purchases then state regulatory
■bodies cannot affirmatively redis
tribute the remaining allowables on
a ratable taking basis. If this
opinion is correct It would follow
that such State Commissions could
only restrict the allowable of all
producers to the level of the lowest
percentage being taken by any pur
chaser from any producer or pro
ducers in such a pool. On such a
theory this would constitute an
unsatisfactory and negative form
of, control, and its exercise would
only drive purchasing power away
from the pool, and in many cases
out of the state where any such
pool might be located.
"Therefore, it becomes apparent
that Proration is something of a
paradox—we control production
without any Public Authority which
is empowered to see to it that
equity and fairness and ratable
MONTANA ACID COMPANY
Licensed hy 0
DOW CHEMICAL CO.
SHELBY, MONTANA
PHONE 133
THE NEW
ARRO
r Sj
L v
Am
Gas
GASOLINE
5ri
'k'
1'
DUBBS CRACKED
AND STABILIZED FOR
CLIMATIC CONDITIONS
THE HOME PRODUCT MANUFACTURED
FROM MONTANA CRUDE OIL
ARRO Oil i REFINING COMPANY
LEWISTOWN, MONTANA
AUTUMN FINDS
WILDCATS ARE
If ABC UIIIICDflllC
INUnC (VUINCI1UUO
The first day of autumn, Friday,
saw the greatest number of wild
cats of the year active in various
Several other
parts of Montana,
projects are resuming or Just start
ing, in the effort to find new pools
of oil and gas.
In northern Montana drilling Is
proceeding at Whitetaii in NW
NE >4 NW% 10-36N-50E, after
conditioning the hole.
On Poplar dome, the well called
Fulton No. 1 was merely a vali
dation, hole, the Journal is inform
ed, and it will probably be taken
over by Floyd Anderson, the drill
er. Thq leases were taken by Fred
Francis.
At Harlem, Montana Gas €orp. is
drilling below 1500 feet on its
Wayne Creek test, in C NW*4
SE l /4 6-32-24E, seeking gas for
Harlem.
'Near Chinook O'Keefe & Tetter
Stam No. 1. CSL SW% SE% 10
31N-18E, on Tiger Ridge, is drill
ing with three tours, reported be
low 450 feet.
It is reported that work is to
start shortly on Hagan structure,
southwest of Cut Bank oil field,
Materials are reported being mov
ed by Cut Bank sponsors of the
test on the sharp-dip structure.
At Landusky, on Bull creek struc
ture, Treasurer State Pool Govern
ment No. 1. C SEViSW^ 2-24-N-23 •
E is drilling at 300. ft. after having
started new hole. The first one
was lost at around 650.
Drilling has not yet started on
the Hoerr well near Whltefish.
The Genou test of Security Pe
troleum. In C NB*4 NB»4 23-36N
3E, is still shut down, with the
hole full of water from the Sun
burst sand, at 1980 feet. «
•In Central Montana the Hunt
wells on Hobson dome are report
ed active.
On Flatwillow structure, near
Winnett, Brundage-Mink No. 1 SE 14
NW*4 36-13N-25E, on Elk creek,
is spudding.
In southern Montana, Broadview
dome test. NE NEV4SW% 18-3N
25E, is drilling in lime at 260.0
feet.
takings are assured to all concerned
and particularly to those producers
who are entirely unable to protect
themselves. No conceivable form ;
of State Compact can have, nor do I
State Commissions have control over ;
all of the factors Involved. Only j
a Federal Agency could be vested '
with such power. Therefore:
"THE PURCHASING COMP AN
ES MUST REALIZE THAT THEY
ARB REQUIRED IN SUBSTANCE
TO DISCHARGE A PUBLIC DUTY
AND OBLIGATION, THE ALTER
NATIVE BEING THAT EITHER
PRORATION WILL FAIL OR FED
ERAL CONTROL MUST BE HAD,
OR THAT BOTH WILL RESULT."
■Sunburst
1W«
tStyS
.
"What did the boss eay when
:yqu asked him for a raise?"
"He was just like a lamb."
"What did he say?"
"Baa."
"Ah bates to tell," she replied,
"'cause he ain't got his divorce
yet."
Colored lady who went to reg
ister as a voter and was asked
what party she afflated with.
.
Discussing the type of milk which
j
should be supplied to school chil
dren, the chairman of the town's
health committee said:
"What this town needs Is a
supply of clean, fresh milk, and we
should take the bull by the horns
and demand it."
HI
Ilf
[Mil
PRODUCING ROYALTIES
I
m
HERE is a time to buy and a time
to sell In every line of business
and particularly in the oil business.
The measure of success of any investor
is largely in his ability to recognize
the proper time to buy and the time to
sell, if at all.
It is a difficult matter, particularly,
to buy producing royalty. It is seldom
that we handle producing royalties such
as are commonly handles! in other pro
ducing states. The average person wants
to bay producing royalty because he Im
mediately receives returns on the In
vestment, but producing royalties re
quire much more careful study than the
non-producing properties. It is our ex
perience that the farmer seldom sells
producing royalty. It Is the profit-taker
who most frequently sells producing roy
alties and he is one who la likely trying
to get the maximum profit. Accordingly,
we have to be careful that we do not
find ourselves virtually trading dollars
when we buy. •
To make this more clear:
alty owner who Is "op against it," and
he will make a sacrifice price that con
forms with our idea of royalty values.
Those royalties are quickly snapped
up by our members who like to get
enough producing royalties so that their
annual income from ALL their royalty
investments shall show them a good rate
of Interest.
We believe that the greatest a
monnt of money can be made from the
purchase of wildcat royalties, which
usually offer the greatest odds. But
this Is too hazardous. It is too much
like a gambling game, with the odds
large in the event of winning but the
probabilities flve-to-one or 10-to-one
against winning at all.
The extreme opposite to buying all
wildcat royalties is to buy only produc
ing royalties, figuring closely and gamb
ling on the per-acre recovery of a given
tract, hoping to get a royalty that will
have exceptionally large production—
greater than the average for the field.
Neither policy Is good business, In
our estimation.
Then what IS the best policy?
We have been buying royalties
for our members for more than 15
years and we have seen the distri
bution of more than $8,000,000.00
of royalty earnings among 3,500
people. We have studied the pro
perties of investors and we have
found that the greatest profits
have been made, on the average, by
those who carefully balanced their
investments among ( 1 ) proven
ground, (2) producing and (3)
wildcat royalties.
Ï
absolute demand for ready cash. The
operator has no steady market for the
oil, so the royalty cannot be used as
bank collateral. So he has to sell It.
When he came to talk with us, we had
to reduce the royalty to a basis of the
value of the oil possibly in underground
storage beneath this 160 acres,
price agreed upon was not based upon
the earning. Instead, it was based
on the probable oil content of the 160
acres.
1
The
1
w.
On the basis of our purchase, this
tract must produce 400 barrels of oil,
worth 91 per barrel, to each acre, to pay
out. If the tract does not produce
MORE than 400 barrels per acre, the op
erator cannot afford to develop it. If
It produces 800 barrels to the acre, then
It would barely be profitable to the op
erator, who expects to get his money
back plus at least 800 per cent. That
would call for a yield of at least 8,000
barrels per acre. However, we receive
100 per cent for each 400 barrels per acre
of production.
1
m
i
i
None can see into the ground to, tell
how much oil is contained in. a given
tract. No* engineer can stand on 160
acres of undeveloped ground in Kevinr
Sunburst field and say definitely that the
tract will produce any certain number of
barrels of oil. But he can examine the
production records 0 f the entire field and
determine what the average developed
acre In the field has already produced.
That will give him some basis of a guess
as to the possibilities but not necessarilly
the probabilities of any proven, tract In
the field.
The VALUE of a royalty depends upon
the amount of oil under a given, piece
of ground,
worth of oil beneath a tract on which
we own royalty, we know that one per
cent royalty will yield us $10,000. It
goes without saying that we would not
pay $10,000 for this one per cent even
if we knew positively that we would re
ceive that amount in return Over the
years of production. Money is able to
earn Interest, so there is no profit in
trading dollars and certainly a loss if
the money does not earn interest.
Sit
If there is $1,000,000
■?
-

^
1
I
I
E
Accordingly, we may get g royalty
that is earning as much as 88 per cent
on the investment. Our first step is to
figure out how much oil the tract must
produce to pay us back our investment
and thereafter a profit. If we Me not
careful we may find that our royalty
must produce MORE than the expected
/recovery of the average acre in the field,
in order to pay ns a profit- In that
case, a return of 83 per cent per an
num does not mean good business.
This tract has one wejl that will yield
around 18 per cent per annum on the
investment. That is not a large income,
but when we consider that there are 81
more locations to be drilled, if is ap
parent that the coming of a market for
crude will see the drilling of additional
wells and resultant increase of royalty
earnings.
That describes the type of royalty
which we believe will make the most
satisfactory profits. Add to this royalty
-some properties which have no produc
tion and which cost less per acre and
which can afford even greater returns
on the Investment when developed, and
we have the basis of a liberal future
income from a relatively small invest
ment.
The most conservative buyers took
mostly producing royalties but their re
turns were not as great, compared with
their investment, as those who took
mostly proven ground royalties. Those
who bound)! only wildcat royalties had
made the least average profit on. their
investment although the occasional In
vestor had hit it lucky and had made
a large profit from a single investment.
That was the exception rather than the
rale.
i
To Illustrate one per cent royalty cost
ing $8,000 Is earning 33 per cent per an
num. To pay out, the tract must pro
duce 100 times $8,000 or $300,000 worth
of oil. We examine the history of de
velopment of the field and pool and find
that the area is expected to produce
5,000 barrels per acre. This tract cov
ers 80 acres, so we find that it takes
8,750 barrels per acre to pay ns back
our investment. That leaves ns a profit
of only $1250 on jour investment—
which is not enough. Furthermore, this
tract may produce MORE than 5,000 bar
rels and it may produce LESS. If It
happens to produce less than the field
average we have little margin to work
:
1
E
We bell eve that the time is here to ==
buy available producing royalties in prov- g
en territory. We believe that at this
time, with restricted markets, we can
buy good royalties for less money than
ever before or perhaps ever again. We
believe, also, that the coming year will
find the crude market opened up to a
point where all of these wells will be
producing at capacity and now wells
will be drilled on properties which are
today Idle.
We learned to avoid investment in
royalties on largely-depleted leases, al
though Cot Creek field fooled ns by pro
ducing two or three times as much as
we had expected It to produce per acre.
We found that the greatest profit has
come to those who have been able to
bity royalty on a farm that has one or
two wells, with a large undeveloped
area- These royalties are not bought
on a Mid-Continent basis, but on the
basis of PROVEN GROUND royalties,
If they are to be really profitable.
We have in mind a royalty which came
to ns Just recently. The owner of this
royalty had g pressing need for cash and
found that the most liquid asset was an
oil royalty on a Kcvln-Sunburat property
on which there Is a producing well. He
would not sell this royalty except for the
on.
It is apparent why we try to get
royalties that will, in every instance,
assure ns of a return of our money back
plus a profit of at least 400 per cent,
and in no event less than 800 per cent.
We figure that a return, of flve-to-one Is
the minimum we need accept.
As stated, we seldom do much with
producing royalties bnt we commend this
plan at this time to members who will
want to Join In snch a baying campaign.
Any wishing to (participate in the pur
chase of producing royalties should send
the attached coupon.
Accordingly, we bay few producing
royalties. Occasionally we find a roy
m
i
i
Landowners
Royalties Co.
Box 1225
LANDOWNERS ROYALTIES COMPANY
Great Falls, Montana.

Am interested to receiving offering sheets on producing
royalties which may be available in 1. Kerin-Sunburst, !
2. Cut Bank. (Designate which field.)
«
( Your Name In Full )
HEAD OFFICE
GREAT FALLS. MONTANA
\
lid
là:
Employe — I came ln to ask If yen
could raise my salary.
Boss—This isn't payday.
Employe—I know that, but I
thought I would speak about It
today.

Boss—Go back to your work and
don't worry. I're managed to raise
It every week so far, haven't I?
I'm the happiest man in the
world. I ve the best wife in the
country.
Who wouldn't be happy with his
wife in the country?
• •
A small (boy explained the doc
trine of evolution in an examina
tion paper thus:
"Men and women both sprang
from monkeys, but the women
sprang further than the men."
I had a little dog. I called him
August. August was fond of jump
ing at conclusions, especially at
the cow's conclusion. One day he
jumped at the male's conclusion.
The next day was the first of Sep
tember.
They were skating at the ice are
na. and Liza fell down, flopped ov
er, and came right up again in
front of Rastus with remarkable
agility.
"Did yu' see how quick Ah re
covered mah equillb'ium, Rastus?"
"Golly, yaas,—almos' befo' Ah
noticed it was uncovered!"
|
Husband.—I've told yon before
that it is economically unsound to
spend your money before you get
It
Wife.—I don't know. If you don't
t least you're got some
; get it
thing for your money,
! ••••*'
1 "Yon used to call me sweetheart
before we were married. Now you
don't call me anything."
"That shows my self-control."
Charlotte: "My good man, does
this dog possess a family tree?"
Owner: "Oh, no, madam—he has
no particular tree,
Clerk "Mr. McPherson, how about
buying the latest atlas?
Mr. McPherson; "Not noo, mon:
I'll wait until the affairs In Europe
are more settled."
WANTED
50,000 GALLONS OR MOKE THIRD GRADE GASOLINE
OR 400 TO 420 END POINT NAPTHA
SWEETENED OR UNSWEETENED
Mail Quotations F. O. B. your plant to
V
S
v
S
5}
S
5
ù
Box 205
CARE MONTANA OIL & MINING JOURNAL
GREAT PALLS, MONTANA
"Are you sure I hare pneumo
nia?" an anxious patient asked a
physician. "1 bare heard that doc
tors sometimes give wrong diag
noses, and have treated patients for
pneumonia who afterwards died of
typhoid feyer."
"You're been woefully misinform
ed," replied the medico indlgantly.
"If I treat a man for pneumonia,
he dies of pneumonia."
• • * • •
Ma: "It says here in the paper
that doctors now believe low neck
dresses ward off pneumonia."
Pa: "Well, according to that
some of the women at the banquet
the other night must have been
trying to ward off lumbago.
SENT) A CONTRIBUTION TO
THE SUNBURST BADGER

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