The Offshore Gamble

"A man can get a little jaded in the oil business after a number of years," said Continental Oil Co. President Leonard F. McCollum. "An oil well comes in, a big deal is made, it all gets to be part of the day's work. But this offshore operation staggers my imagination. Just staggers it."

Oilman McCollum had reason to be staggered last week. Eighteen miles off Jefferson Parish, La., his company brought in the deepest well (15,058 ft.) in the deepest water (97 ft.) ever drilled in offshore exploration.

To bring it in, Conoco, the seventh biggest integrated oil company in the U.S. in gross operating income, used a drilling platform that stands 50 feet above the water. It has a main deck measuring 220 ft. by 106 ft., supported by 24 steel pilings, each 300 feet long, that are rammed 150 feet into the ocean floor. It cost $1,500,000, weighs 1,600 tons (as much as a destroyer), has air-conditioned barracks, a TV set, a food-packed galley, a helicopter landing spot, and is the biggest offshore rig ever built. Said McCollum: "The cost was awful. But now that we've hit one well off it, the second and third and fourth and fifth will start making it profitable. The big fields offshore will be highly profitable. If we'd missed on it, it would have been catastrophic."

On its own or in partnership with other oil firms, Conoco has leased 587,000 acres of offshore land, more than any other U.S. company. In the race for the estimated 12 billion barrels of oil under the Gulf waters, Conoco ranks No. 1.

Gamble Or Lose Out. Eight years ago the company was in quite another spot. Though old (founded in 1875) and respected, conservative Conoco was in danger of being left far behind by its competitors. While other companies snapped up leases and bought options, Conoco refused to part with good money unless it could be sure. Since oil is usually a case of gamble or get left out, Conoco was being left out. To get fresh leadership, the directors hired McCollum, then 45 and production coordinator of giant Jersey Standard, gave him a fat stock option (which today shows a paper profit of upwards of $4,000,000), a salary of $125,000 and a free hand. Within eight years Conoco more than doubled its refinery capacity and its gross income ($500 million in 1954). It boosted the number of wells completed by 75%, built the first major offshore pipeline, and bought the largest interest in the giant Great Lakes pipeline. It leased nearly five times as much acreage as it had before, raised capital expenditures (primarily for wells and leases) by 122%, nearly doubled the number of gas stations throughout its area, and laid plans to expand to both coasts.

Needed: Leadership. Abroad, the company joined Standard Oil of Ohio and Amerada in forming the Conorado Petroleum Corp. to explore outside North

America, and went off on its own to develop a 50-million-acre concession in Egypt, one of the world's largest. All this was accomplished on a sound financial basis: company assets more than doubled (from $209 million to $480 million), and so did dividends (from $1.25 to $2.60 a share).