Life before and after independence from Standard Oil.

 

John D. Rockefeller in 1870 founded Standard Oil Company, and by 1890 his complete dominance of the U.S. petroleum industry put every small oil venture in his path at risk. The Ohio Oil Company was founded to fight back.

As U.S. petroleum production grew, independent producers found themselves with only one market — Standard Oil Company — and their own oversupply of crude oil driving prices down. Rockefeller believed only a few large, vertically integrated oil companies could survive and prosper; smaller companies simply could not. “We will take your burden,” Rockefeller told these companies. “We will utilize your ability; we will give you representation; we will all unite together and build a substantial structure on the basis of cooperation.”

Many oil company owners rejected Rockefeller’s offers, but most sold out. When they did, Rockefeller shut down inefficient companies and used what he needed from the efficient ones. To resist the Standard Oil Trust, several small wildcat enterprises joined forces in 1887 in Lima, Ohio. They formed the Ohio Oil Company with Henry Ernst serving as president.

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However, the Ohio alliance only delayed the inevitable, and in 1889 Standard Oil Trust added the company to its growing list of acquisitions. James Donnell replaced Henry Ernst was as president of the company. Donnell was a former wildcatter who had completed Standard Oil’s first major gas well during the Indiana Natural Gas Boom. He soon moved the company headquarters from Lima to Findlay (where it would remain until 1990).

With the power of the Standard Oil Trust behind it, the Ohio Oil Company quickly expanded production. In 1906, Rockefeller sent Donnell to investigate possibilities in Casey, Illinois, where an abundance of oil and the absence of transportation to eastern refineries promised low prices at the well.

Donnell purchased the few miles of existing pipeline operated by the Buckeye Pipe Line Company and began his own intense program of building pipelines, tank farms, and pumping stations. Oil that cost 65 cents per barrel in the field sold for $1.30 back east. The subsidiary Illinois Pipe Line Company was soon formed. In the coming years, the company expanded it pipeline operation to transport oil from its parent, Ohio Oil Company.

By 1908, Ohio Oil controlled one-half of all field production in Illinois, Indiana, and Ohio. All of the company’s oil went to just one customer – the refineries of the Standard Oil Trust.

In 1911, growing anti-trust sentiment in the country led to the U.S. Supreme court decision compelling the breakup of Standard Oil. Ohio Oil Company once again became an independent company after 12 years under the Standard Oil Trust. Donnell continued as president.

The newly independent Ohio Oil Company faced growing challenges of depleted Indiana and Ohio fields, as well as diminished production from its Illinois wells. Finding new oil sources with economic potential was critical to the company’s survival. At this time, oil leases on government lands in the West could be acquired at no cost under terms of the 1870 Placer Act. The act permitted prospectors to enter public lands and lay claim to any mineral they discovered, provided they “diligently pursue the find.”

In 1912, Ohio Oil Company sent tough oilfield veteran “Uncle Jack” McFadyen to Wyoming in search of oil. Wyoming was largely wilderness — few roads and fewer towns. On the Tisdale Ranch, about 100 miles north of Casper, McFadyen drilled a wildcat well. Back at the company headquarters in Findlay, Donnell waited for good news.

When news did come, it was not good. As later annotated on a local map, the “1913-1914 Tisdale Fiasco” proved to be a $250,000 dry hole. Undeterred, the search continued and the next two Placer Act wells west and north of Thermopolis — Grass Creek and Elk Basin — both came in as producers. A long and profitable relationship began with Wyoming, but news from Texa as new sources of oil remained a necessity.

Ohio Oil in Texas

The discovery at Spindletop Hill near Beaumont, Texas, in January 1901 transformed the economy of the state and the industry. As more exploration companies rushed to the state, the search for new oilfields pushed westward and in 1917, the McClesky No.1 well opened the prolific Ranger Field about 100 miles west of Dallas.

By 1923, Eastland County was home to 2,000 derricks, but none had ventured further west, across the Pecos River. The most petroleum geologists insisted no oil was to be found in the arid region.

Nonetheless, a persuasive and tenacious rancher named Ira Yates had been able to sell leases four times, but all four leases lapsed with no drilling. Transcontinental Oil Company retained drilling rights on Yates’ 4,000-acre ranch, but was cash poor and reluctant to wildcat across the Pecos into doubtful prospects.

Transcontinental’s field oil production had been in decline since its Desdemona, Texas, source dropped off from 2,283 barrels of oil per day to only 212 per day. Unsuccessful in finding new oil, financially stressed Transcontinental entered into an agreement with Ohio Oil Company’s Donnell for drilling four wells on the Transcontinental leases in return for half-interest in any discoveries.

Ohio Oil Company

The Ohio Oil Company marketed its oil products as “Linco” after purchasing the Lincoln Oil Refinery in 1920. Undated photo of a station in Fremont, Ohio.

While drilling on the Transcontinental leases was underway in 1924, Donnell’s son, managing vice president Otto “O.D.” Donnell, advocated a new strategy for the Ohio Oil Company. “We must diversify; we must integrate and develop outlets for the company’s crude oil. Ohio Oil must become its own customer,” he said. This strategy would take the company into the “downstream” part of the oil business for the first time.

With O.D. Donnell’s prodding, the company acquired Lincoln Oil Refining Company in June 1924. Along with the refinery came 17 service stations selling the “Linco” brand of gasoline, providing an unbroken link from the Ohio Oil Company’s wells to automobiles’ gas tanks.

By 1926 and with expenses mounting, neither the first, second, nor third wildcat wells on the Transcontinental leases had found oil. Under terms of the agreement, the Ohio Oil Company was not obligated to undertake the expense of drilling the fourth well. Only the stubborn, very vocal, and persuasive objections of Chief Geologist Frank Clark convinced Ohio Oil Company Donnell to continue.

On October 5, 1926, Transcontinental Oil Company and Ohio Oil Company’s subsidiary, Mid-Kansas Oil and Gas Company, jointly spudded the Ira G. Yates 1-A. The well was drilled with cable tools for less than $15,000. Two-weeks later, at a depth of 992 feet, the well yielded its first oil and became the discovery well for the giant Yates oilfield of the Permian Basin. A second well was quickly set up and began producing 3,440 barrels of oil a day from a depth of 1,002 feet. By spring 1927 three more wells were completed, with average production of 9,099 barrels a day.

The Yates field would ultimately return between $10 million and $15 million to the Ohio Oil Company. Within a year, the Ohio Oil Company had 350 employees and 70 flowing wells on the Yates site. The boomtown of “Iraan” (from ranch owners’ Ira and Ann Yates) sprang up, 26 miles from the nearest railroad and 125 miles from the nearest city of any size.

By 1997, the Yates field would yield a cumulative total of 1,336,948,451 barrels of oil, making it one of the most prolific oilfields in the world. The oilfield even inspired the comic strip “Alley Oop.”

The Ohio Oil Company was soon shipping Yates field oil through its own pipelines southward to the company’s Del Rio market. Transcontinental’s refineries however, were north in Ft. Worth. With the 1929 stock market crash and onset of the Depression, the financially strapped Transcontinental sold out to the Ohio Oil Company for 1,848,051 shares of newly issued stock.

With the purchase of Transcontinental came the 376 filling stations and the valuable Marathon brand, with its widely recognized trademark Greek runner Pheidippides and slogan, “Best in the Long Run.” In 1962, in recognition of the company’s 75th Anniversary, the Ohio Oil Company changed its name to Marathon Oil Company. To learn more how it remains true to its 1887 roots, see Marathon of Ohio Oil

Ohio’s Hancock Historical Museum in Findlay includes petroleum-related exhibits from the region.

The many stories of many exploration companies trying to join petroleum booms (and avoid busts) can be found in an updated series of research at Is my Old Oil Stock worth Anything?

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The American Oil & Gas Historical Society preserves U.S. petroleum history. Become an AOGHS annual supporting member and help maintain this energy education website and expand historical research. For more information, contact bawells@aoghs.org. Copyright © 2021 Bruce A. Wells. All rights reserved.

Citation Information: Article Title – “Ohio Oil Company.” Authors: B.A. Wells and K.L. Wells. Website Name: American Oil & Gas Historical Society. URL: https://aoghs.org/stocks/ohio-oil-company. Last Updated: January 07, 2021. Original Published Date: December 29, 2014.

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