Cities Service subsidiaries discovered giant Mid-Continent oilfields.
Cities Service Company was established in September 1910 by Henry Latham Doherty as a public utility holding company in Bartlesville, Oklahoma, home of the first commercial Oklahoma oil well. Five years after its founding, Doherty’s company would make its own historic discoveries.
Doherty began by selectively purchasing natural gas producing properties in Kansas and Oklahoma. He acquired distributing companies and linked them to his natural gas supplies. Cities Service Company derived income from the subsidiary corporations’ stock dividends. One natural gas subsidiary drilled exploratory wells in central Kansas.
Occidental Petroleum acquired Cities Service Company in 1982. Stock certificates have only collectible value.
“Snake Hollow Gusher” brought a natural gas drilling boom (and bust) to Pittsburgh.
“Rarely, a community sees its pulse quicken with a get-rich quick beat, feels the boom fever strike, suffers the chill of disillusion when the ‘El Dorado’ fades out and then recovers,” noted the Pittsburgh Press on July 15, 1934.
“But this is what happened at the McKeesport gas field, scene of the Pittsburgh district’s biggest boom and loudest crash,” the newspaper added. McKeesport Gas Company was among the many petroleum company casualties.
Pennsylvania natural gas fields attracted investors to many ambitious drilling ventures, including McKeesport Gas Company.
Following the first U.S. oil discovery at Titusville, Pennsylvania, in late August 1859, natural gas development began in western Pennsylvania.
With new oilfields came discoveries of large volumes of gas suited for illumination, heating, and manufacturing. Natural gas began to be widely used after two brothers drilled into a massive gas field gas field on November 3, 1878.
The Haymaker brothers’ discovery brought the new energy resource to Pittsburgh factories and steel mills. By the late 1880s, Pittsburgh skies cleared for the first time in decades as mills and factories burned natural gas instead of coal.
Learn more about the once famous 1878 Haymaker gas well in Natural Gas is King in Pittsburgh.
For investors in 1919, the region’s natural gas history seemed to be repeating itself. McKeesport Gas Company was one of about 300 petroleum companies that sprang up within six months of an August 30, 1919, discovery — a runaway natural gas well near McKeesport.
The “Snake Hollow Gusher” between the Monongahela and Youghiogheny rivers, blew in at more than 60 million cubic feet of natural gas a day. The headline-making gas well, drilled by S.J. Brendel and David Foster, prompted a frenzy that saw $35 million dollars invested during the boom’s seven-month lifespan.
McKeesport Gas Company incorporated on December 5, 1919, and two-weeks later enticed investors with advertisements in the Pittsburgh Press and the Gazette Times newspapers.
“Over 500 Acres of Leases in the Heart of the McKeesport Gas Fields,” proclaimed one newspaper ad, offering stock at $1.25 a share.
“Many residents signed leases for drilling on their land,” noted another local reporter. “They bought and sold gas company stock on street corners and in barbershops transformed into brokerage houses in anticipation of fortunes to be made.”
Then the natural gas reserves ran out.
By the beginning of 1921, McKeesport natural gas production was falling in about 180 producing wells — and more than 440 unsuccessful wells had been drilled. The field would be reported as, “the scene of the Pittsburgh district’s biggest boom and loudest crash.”
Of the estimated $35 million sunk into the nine square mile area of the boom, only about $3 million came out.
A detail from “McKeesport, Snake Hollow, Gas Belt,” a circa 1920 panoramic image by Hagerty & Griffey. Photo courtesy Library of Congress.
A circa 1920 panoramic photograph at the Library of Congress captured the drilling boom at the McKeesport, Snake Hollow, Gas Belt, by Hagerty & Griffey.
McKeesport Gas Company likely drilled a few of the boom’s hundreds of dry holes and with funds exhausted, disappeared into petroleum history. Fifteen years later, McKeesport Mayor George H. Lysle explained to a Pittsburgh newspaper reporter how the town survived the “seven-month wonder” natural gas boom:
“Other boom towns,” he said, “were built merely on the strength of the wealth that was to pour from their wells or mines. But McKeesport and vicinity was established before the boom came.
When it was over, people still had their jobs in the mills and stores, the permanent population remained, and the natural resources of the district, except for gas, were still as great as ever. We were still a great industrial community.”
Advances in the science of petroleum geology and improved production technologies have brought surer results than the Snake Hollow Gusher. Beginning 2010, the region’s gas boom — the Marcellus Shale — extended across western Pennsylvania into other Appalachian Basin states.
McKeesport Gas Company stock certificates have collectible value.
The stories of many exploration companies trying to join petroleum booms (and avoid busts) can be found in an updated series of research in Is my Old Oil Stock worth Anything?
Recommended Reading: McKeesport – Images of America: Pennsylvania (2007); Western Pennsylvania’s Oil Heritage (2008); The Extraction State, A History of Natural Gas in America (2021); Your Amazon purchase benefits the American Oil & Gas Historical Society. As an Amazon Associate, AOGHS earns a commission from qualifying purchases.
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 email@example.com. Copyright © 2022 Bruce A. Wells. All rights reserved.
Citation Information: Article Title: “McKeesport Gas Company.” Authors: B.A. Wells and K.L. Wells. Website Name: American Oil & Gas Historical Society. URL: https://aoghs.org/stocks/mckeesport-gas-company. Last Updated :August 26, 2022. Original Published Date: April 29, 2013.
At the start of the 20th century, a growing number of Mid-Continent oilfields began their long history of oil discoveries. With them came the drilling boom and bust cycles of the U.S. petroleum industry. Major oilfield discoveries in North Texas during and after World War I, launched new, inexperienced ventures, including Sunshine State Oil & Refining Company
Although oil wealth would helped build Wichita Falls schools, infrastructure, hotels, banks, churches, and civic pride, competition increasingly made drilling prospects hard to come by. Oilfield equipment costs rose as excessive production lowered oil prices.
New oil exploration and production companies often arrived too late and went bankrupt without drilling single well. This did not discourage the rush for new investors (see Exploiting North Texas Fever).
A 1918 oil discovery near Wichita Falls joined earlier discoveries at Electra (1911) and Ranger (1917) to make Texas a worldwide leader in petroleum production.
The Texas Panhandle oil drilling boom began when the giant Ranger oilfield was discovered in October 1917 near Electra — where a 1911 shallow oilfield discovery already had attracted drillers. The “Roaring Ranger” well alone reached a daily production of 1,700 barrels of oil. The giant oilfield helped fuel the Allies’ victory in World War I.
Meanwhile, Conrad Hilton, who visited the Ranger area intending to buy a bank, saw the crowds of oilfield roughnecks and bought his first motel in nearby Cisco instead — learn more in Oil Boom Brings First Hilton Hotel.
Boom Town Burkburnett
Just outside Wichita Falls, at Burkburnett on July 29, 1918, a wildcat well erupted on S.L. Fowler’s farm just north of Wichita Falls near the Red River border with Oklahoma.
The new drilling boom made Burkburnett yet another famous American boom town. Two decades later it inspired the popular 1940 motion picture, “Boom Town,” which won an Academy Award. The oilfield drama featured Clark Gable (himself a former Oklahoma roughneck), Spencer Tracy, Claudette Colbert and Hedy Lamarr.
Even prior to the Burkburnett discovery, North Texas oilfields were producing half of all the state’s oil. Wichita Falls prospered and the town’s railroad line expanded. Refineries began to appear in 1915. That year Wichita County reported 1,025 producing wells.
In 1920 there were 47 factories within Wichita Falls. One year later the Wichita Falls and Southern Railroad Company added an extension for trains between Wichita Falls, Ranger and Fort Worth.
Sunshine State Oil & Refining
Among those rushing to the region’s boom towns was Sunshine State Oil & Refining Company, which incorporated in New Mexico on April 21, 1917. The new company set up its main operations in Wichita Falls capitalized at only $300,000.
Although Wichita Falls already hosted no less than nine competing independent refineries, the company built its own 3.5 miles north of town with an initial capacity of 1,250 barrels of oil a day that grew to 2,500 barrels of oil a day.
By 1920, Sunshine State Oil & Refining had increased capitalization to $650,000 and secured ownership of a 45-mile pipeline to connect with oil producers in the Burkburnett and Kemp-Munger-Allen fields.
Sunshine State Oil & Refining Company had offices in the American National Bank Building in Wichita Falls, Texas.
By July 1922 the company marketed its brand of gasoline and kerosene in Wichita Falls, Burkburnett, Electra, and Gainsville. It also explored opportunities in Eddy and Chavez counties in New Mexico to secure further oil supplies.
The company sold its finished products, principally gasoline and kerosene, in railroad tank cars and managed a fleet that grew from 50 cars to 150 cars. “Manufacturers and Distributors – Gasolene, Naptha, Kerosene Distillates, Fuel Oil and Gas Oils,” proclaimed advertisements with the registered trade name of “Sunshine Special” for products.
Sunshine State Oil & Refining Company was reported to pay 100 percent dividends – but those dividends were paid in shares of company stock. To raise money, the company increased capitalization again and issued more stock.
However, a refining company’s margin for success was inevitably linked to the cost of crude oil and the price of refined petroleum products.
Sunshine State Oil & Refining sold its finished products in railroad tank cars and managed a fleet that grew from 50 cars to 150 cars.
Small independents faced additional challenges, as Sunshine State Oil & Refining Company President George C. Jensen would later note:
“The larger companies will pay posted price and the only way that the independent refineries are able to buy crude oil is to offer a large bonus, in some cases as much as 40 cents per barrel premium over prices paid by Standard Oil,” Jensen complained to Petroleum Magazine’s “Open Forum” readers. “They consequently cannot make a fair profit on refined products.”
Under these and other market pressures, Sunshine State Oil & Refining Company’s refinery began to operate well below capacity.
Sunshine sets in North Texas
As the drilling industry and the refineries competed, Wichita Falls prospered, thanks to “Black Gold.” The city added a municipal auditorium in 1927 and an airline passenger service in 1928 – the same year the city’s first commercial broadcasting station, KGKO, was established.
However, as early as July 1924 Sunshine State Oil & Refining Company was struggling with debt. The company issued more stock to raise capitalization to $1.5 million and in an agreement with shareholders changed its name to Sunshine Consolidated Oil Company.
Shareholders had to exchange their old stock certificates for the new Sunshine Consolidated Oil shares. The old Sunshine certificates were canceled. Efforts to sell new shares on the New York “curb market” did not fare well.
“Say Sunshine” advises this card for newly renamed but still financially troubled Sunshine State Oil & Refining Company and its “made in Wichita Falls product.”
As fundraising efforts failed, creditors forced the renamed company into receivership, which was contested but ultimately adjudicated by the 89th District Court in Texas. Assets were sold off to pay creditors. By November 5, 1925, the Corsicana Daily Sun reported:
A sale involving a cash consideration of $159,000 was consummated in the Wichita Falls oil district Wednesday when Bridwell & Heydrick closed a deal with receiver of the Sunshine Consolidated Oil Company whereby a number of leases in the Sunshine State and Freeman Hampton pools of Archer county changed hands.
After an intense and competitive seven years in business, Sunshine/Consolidated Oil Company failed, joining other oilfield ventures in the high-risk business of petroleum exploration, production and refining. The industry’s boom and bust cycles continue to this day.
North Texas petroleum prosperity began on April 1, 1911, when geyser of oil erupted at the Clayco No. 1 well at Electra,which would later be awarded the title of “ Pump Jack Capital of Texas.”
More stories of many exploration companies trying to join petroleum booms (and avoid busts) can be found in an updated series of research in Is my Old Oil Stock worth Anything?
Recommended Reading: Trek of the Oil Finders: A History of Exploration for Petroleum (1975); The Prize: The Epic Quest for Oil, Money & Power (1991); Myth, Legend, Reality: Edwin Laurentine Drake and the Early Oil Industry (2009). Your Amazon purchase benefits the American Oil & Gas Historical Society. As an Amazon Associate, AOGHS earns a commission from qualifying purchases.
The American Oil & Gas Historical Society preserves U.S. petroleum history. Join today as an AOGHS annual supporting member. Help maintain this energy education website and expand historical research. For more information, contact firstname.lastname@example.org. Copyright © 2022 Bruce A. Wells. All rights reserved.
Citation Information – Article Title: “Sunshine State Oil & Refining Company.” Authors: B.A. Wells and K.L. Wells. Website Name: American Oil & Gas Historical Society. URL: https://aoghs.org/old-oil-stocks/sunshine-state-oil-refining-company. Last Updated: August 2, 2022. Original Published Date: July 22, 2018.
Although geologists, petroleum engineers and other earth scientists were far more helpful for finding “black gold,” Oil Prospectors Inc. preferred unscientific methods to sway unwary investors.
During the Great Depression, some fortune seekers were convinced a “divining rod, a doodlebug, a switch, or a twig” could find oilfields. In the 1950s, others invested in doodlebug technology they were told came from flying saucers. Then as now, any “miraculous machine” could help fleece the gullible.
In the rush to print stock certificates during drilling booms, many companies printed certificates with a field of derricks vignette — often using the same artwork.
Not long after the December 1931 discovery of the Conroe, Texas, oilfield, a “doodlebug” device swindled Houston oil investors out of $20,000. It also sent Ralph Malone and Vivian Buie to jail in 1935.
During their trial in district court, a prosecution witness told of receiving letters describing the doodlebugger as capable of finding oil and natural gas in Polk County.
Malone and Buie claimed their device would find “another field like the Conroe field” worth millions of dollars. They described their doodlebug as “a wonderful instrument that could locate oil pools.”
Learn about Conroe’s oilfield in Technology and the “Conroe Crater.”
Despite their defense attorneys efforts, Malone and Buie (the alleged “brains” of the doodlebug scam), were convicted of mail fraud and sentenced to terms in the federal penitentiary at Leavenworth, Kansas. Then their defense attorneys were indicted as well.
While their former clients headed off to prison, Arthur Heemann and C. Ray Smith hired their own legal council. The new defense team asserted the accused, “merely were attorneys for the swindlers and did not participate in the scheme.”
It did not help that attorney Heemann had been charged five years earlier with the same crime while promoting the similarly fraudulent Oil Investors Company.
Nonetheless, the lawyers got the lawyers off when the judge ruled them not guilty on April 15, 1938. Two months later, Ralph Malone was transported from Leavenworth to a Tucson, Arizona, prison to finish his three-year sentence.
Doodlebugs, Magnetic Loggers, and Flying Saucers
Although Malone was absent from oil stock scams for several years, investors did not abandon their fascination with doodlebugs. The convicted con man resurfaced in the early 1950s when his penchant for mail fraud landed him in trouble with the Securities and Exchange Commission (SEC).
“Often investigation is directed to highly objectionable sales literature which greatly over emphasize the possibilities of success from the proposed security purchase,” the SEC noted in its 17th annual report. “So it was in the case of Oil Prospectors, Inc. and Ralph Malone.”
One year later, the SEC again addressed the issue of doodlebugs, explaining the necessity of resorting to the courts to get compliance with the Securities Act.
“A substantial number of cases requiring injunctive action are those relating to oil and mining promotions,” noted the June 30, 1952, annual report. “The ‘gold brick’ aspect of many of these promotions has by now become quite stereotyped.” The SEC’s complaints seeking injunctions pointed out that, “sellers were omitting to disclose that these individuals had criminal records.”
The commission cited another example of “the almost perennial doodlebug” where the “defendants used in their operations a device called a ‘Magnetic Logger’ and the claims made for its efficacy in discovering oil were the usual ones and were false…There is reason to believe that the injunction obtained by the commission saved the investing public a substantial sum.”
An SEC injunction in 1951 finally brought an end to Oil Prospectors and Ralph Malone disappeared from the news. Doodlebug hoaxes continued.
Most notably, Silas Newton and Leo GeBauer, claimed their doodlebug machine “operated on the same magnetic principles as the flying saucers.” The $800,000 contraption had been developed secretly by the government.
They promoted the tale of a 1948 flying saucer crash site near Aztec, New Mexico, that had yielded 16 humanoid bodies (Roswell’s aliens had reportedly arrived a year earlier).
Newton and GeBauer claimed the Aztec crash site included revolutionary technology for finding oil.
Silas Newton and Leo “Dr. Gee” GeBauer convinced author Frank Scully (at right) the government was hiding UFO crash sites and humanoid corpses. Investors believed their claims that a secret alien device could locate vast petroleum reserves.
Although some still maintain an elaborate government cover-up has concealed the real Aztec UFO story, the petroleum exploration technology has received little mention. By 1952, the terrestrial luck of Newton and GeBauer ran out. The Denver Post’s October 14 headline proclaimed, “Saucer Scientist in $50,000 Fraud.”
In 1950 Frank Scully had published Behind Flying Saucers, a book reporting crashed UFOs (powered on magnetic principles) and the discovery of dead extraterrestrial beings.
In September 1952, True Magazine investigated Frank Scully, Silas Newton, and Leo GeBauer, the three principals involved in Scully’s best-selling book, Behind the Flying Saucers.
In 1952 and again in 1956, True magazine published articles that exposed doodlebug machine promoters Silas Newton and “Dr. Gee” (identified as Leo GeBauer) as “oil con artists who had hoaxed a gullible Scully,” according to the 1998 book, UFOs & Alien Contact: Two Centuries of Mystery.
It turned out the UFO inspired oil doodlebug was just a box covered in dials and switches made from $3.50 in surplus radio parts. The revelation brought little comfort to swindled investors.
Stock Certificate Derricks
Speculating in oil stocks has been hazardous since the first company incorporated in 1854 in Pennsylvania (see First American Oil Well). As drilling booms moved westward, thousands of exploration companies competed to exploit “black gold.” Most failed after a few expensive dry holes — or without drilling a single well.
Especially during the major oilfield discoveries beginning after World War I and continuing through the Great Depression, the rush to form oil companies led to certificates that looked remarkably alike. Printing boiler-plate stock certificates was not uncommon in the scramble to find investors.
For example, many short-lived companies’ stocks features the same artwork as Oil Prospectors Inc. Here are just a few:
Buck Run Oil and Refining
Craven Oil and Refining
Hog Creek Carruth Company
Texas Production Company
The Society of Exploration Geophysicists (SEG) published its first journal, Geophysics, in 1936. It included articles about the petroleum industry’s three major prospecting methods then used – seismic, gravity, and magnetic. All were based on the scientific method.
The journal’s lead article warned young geophysicists about employing “black magic” or “doodle-bug” methods based on unproven properties of oil, minerals or geological formations. “This is the first time that the term ‘doodle-bug’ was applied to scientific methods, particularly if they had no scientific validity, according to the 1982 book, Geophysics in the Affairs of Men.
“Twenty years later, it was a badge of honor to be known as a doodlebugger, i.e., the field personnel of geophysical crews,” noted the authors Charles C. Bates, T. F. Gaskell and R. B. Rice. “Still later, the term was applied to everyone who worked in exploration geophysics.”
A bronze statue, “The Doodlebugger,” welcomes visitors to the Society of Exploration Geophysicists headquarters in Tulsa. The name is a badge of honor for geophysical crews seeking oil. Photo by Bruce Wells.
Editor’s Note – The sculptor of the SEG statue, Jay O´Meilia of Tulsa, Oklahoma, also was the artist who created two “Oil Patch Warrior” statues – one in Ardmore and another across the Atlantic. See Roughnecks of Sherwood Forest.
More research and articles about U.S. exploration and production companies joining petroleum booms (and avoiding busts) can be found updated in Is my Old Oil Stock worth Anything?
Recommended Reading: The Prize: The Epic Quest for Oil, Money & Power (2008); The Extraction State, A History of Natural Gas in America (2021); The Birth of the Oil Industry (1936); Trek of the Oil Finders: A History of Exploration for Petroleum (1975). Your Amazon purchase benefits the American Oil & Gas Historical Society. As an Amazon Associate, AOGHS earns a commission from qualifying purchases.
The American Oil & Gas Historical Society preserves U.S. petroleum history. Join today as an annual AOGHS annual supporting member. Help maintain this energy education website and expand historical research. For more information, contact email@example.com. Copyright © 2022 Bruce A. Wells. All rights reserved.
Citation Information – Article Title: “Oil Prospectors, Inc.” Authors: B.A. Wells and K.L. Wells. Website Name: American Oil & Gas Historical Society. URL: https://aoghs.org/stocks/oil-prospectors-inc. Last Updated: August 8, 2022. Original Published Date: May 13, 2016.
Early petroleum exploration began near oil seeps in Indian Territory.
Drilled in 1889 and completed a year later near oil seeps at Chelsea in Indian Territory, the story behind the another first Oklahoma oil well is not as well known as the Bartlesville gusher seven years later.
Under President Andrew Jackson, Congress enacted the Indian Removal Act of 1830, forcibly relocating native American tribes westward to what would later become known as Indian Territory.
The Cherokee Nation town began as a stop on the Atlantic and Pacific Railroad in 1881.
Land west of Arkansas, “remote from white settlements,” seemed a good place to send them at the time, explained a 1900 report by the American Geographical Society of New York (Vol. 32). “It was intended to settle them there for all time, whereby they could live to themselves, according to their own pleasure, with self-government, under the protection of the general Government.” (more…)
Drilling booms attracted investors seeking “black gold” riches, real or imagined.
Exaggerated, questionable, and sometimes fraudulent claims by shady business ventures seeking investors grew in the years following World War I. As the Great Depression approached, many states passed “blue sky laws” to regulate securities sales and protect the public from fraud.
But it would take an act of Congress in 1934 to stop skilled swindlers from taking advantage of unwary investors seeking often fictional profits. Federal lawmakers established the Securities and Exchange Commission (SEC) to help rein in exaggerated claims found in newspaper advertisements, mail solicitations, and other stock promotions.
Since the U.S. petroleum industry’s earliest booms and busts in Pennsylvania following the Civil War, the need for dependable information and early financial centers — petroleum exchanges — led to a new profession — the oil scout.
As demand for refined kerosene for lamps grew, the search for new oilfields moved to mid-continent. Thousands of exploration and production companies were established. Most drilled dry holes. When wildcat wells (remote) revealed giant oil and natural fields in Texas and Oklahoma, a new generation of business financing hucksters took advantage.
The J.H. McCleskey No. 1 discovery well of October 1917 created an mammoth oil boom at Ranger and across Eastland County, Texas. Photo courtesy Library of Congress.
Giant oilfield discoveries in North Texas made headlines, leading to the hundreds of new exploration companies (see Is my Old Oil Stock worth Anything?). Many began by seeking capital from local investors, often banks, doctors, and civic leaders.
Newspapers nationwide reported wells with geysers of oil at Electra (1911), Ranger (1917), and the “World’s Wonder Oilfield” of Boom Town Burkburnett (1918). Publicity about these oil booms rekindled enthusiasm for Texas petroleum riches not seen since the giant oilfield discovery at Spindletop Hill in 1901, the famous “Lucas Gusher.”
Sudden, unexpected “black gold” or “Texas tea” wealth brought prosperity to struggling farming communities. Thanks to the Ranger oilfield, Eastland County’s Merriman Baptist Church (and graveyard) was once declared the richest church in America.
Black Gold Dreams
Criminals specializing in financial deception joined the influx of drilling contractors, workers, equipment suppliers, lease brokers, and associated oilfield service companies. In part to combat fraud in North Texas, the American Association of Petroleum Geologists (AAPG), founded in 1917, American Petroleum Institute (API), founded in 1919, and other industry associations organized.
With so many oil boom-inspired companies forming so quickly, the rapid printing of eye-catching but boiler-plate stock certificates often occurred (see Oil Prospects Inc. for one of the most common certificate vignettes).
In a rush to find investors, quickly formed exploration companies ended up using the same oilfield scene for stock certificates. It might have saved time and money by choosing a printer’s common vignette.
Already iconic U.S. boom towns and busts (see the remarkable 1865 rise and fall of Pithole, Pennsylvania) would help launch major companies like Marathon and Texaco, as did the first California oil wells. New petroleum discoveries attracted experienced companies — and many more inexperienced exploration and production ventures that aggressively sought leases, equipment and men, and investors.
However, with little knowledge of the new science of petroleum geology and drilling technologies, few of newly formed companies would find oil. Most did not survive long in the highly competitive oilfields.
Crowding too many wells on leases and a lack of infrastructure for storing and transporting oil harmed the environment. Many companies learned from hard experience, but more went bankrupt without ever finding oil.
Competing exploration companies, lacking petroleum engineers and efficient production technologies, often overproduced geological formations. Unchecked drilling and oversupply in the oil market led prices to collapse as low as 15 cents per 42-gallon oil barrel in the giant East Texas oilfield of the 1930s.
Huckster of Hog Creek
The lure black gold also attracted skilled confidence men who could create oil companies on paper. J.W. “Hog Creek” Carruth was among the most notorious.
Financial World in 1912 described “Hog Creek” Carruth as a con man who made a fortune selling worthless oil stocks. The magazine also cited the far better known infamous explorer Dr. Frederick Cook (learn more in Arctic Explorer turned Oil Promoter).
In September 1918 a discovery well near Desdemona blew in after reaching a depth of 2,960 feet, initially producing 2,000 barrels of oil a day. “Unlike Ranger, Desdemona was a small operator’s field. Production reached a peak of 7,375,825 barrels in 1919, and then dropped sharply, chiefly because of over drilling,” according to the Handbook of Texas Online.
“Hog Creek” Carruth proclaimed himself to be the discoverer of the Desdemona oilfield (he was not). He advertised expansively to sell worthless stocks inflated by his phony reputation.
Pilgrim Oil Company
Pilgrim Oil Company formed as a common law trust estate (unincorporated business managed by trustees) in Fort Worth, Texas, on December 20, 1920. The company’s trustees included George M. Richardson and Warren H. Hollister. and was capitalized at $1 million with 100,000 shares offered at par value of $10.
The petroleum company, another fraudulent enterprise of J.W. “Hog Creek” Carruth, would be his last.
J.W. “Hog Creek” Carruth falsely claimed to have discovered the Desdemona, oilfield, along Hogg Creek. Detail from circa 1919 panoramic photo courtesy Library of Congress.
The oilfield along Hog Creek had been discovered in 1918, just one year after the famous Ranger well. This new field at Desdemona (once called Hog Town) attracted the usual rush of new exploration companies, many with little or no drilling experience.
Among the Eastland County startups, a wily financial conman’s Hog Creek Carruth Oil Company profited by colorful stock sale advertisements to attract investors.
The skillfully exaggerated promotions of Carruth prompted one contemporary writer to admire the crook’s audacity. “Any reader who cannot get a thrill out of Carruth’s highly colored advertising literature is indeed phlegmatic,” the observer declared.
But harm to many small, unwary investors was real. Most of the stock sales’ dollars went into Carruth’s pockets instead of his companies. Even the failure of his oil companies became part of his schemes.
Hogg Oil + Hog Creek Carruth Oil
Carruth merged two of his insolvent petroleum companies — Hogg Oil Company and Hogg Creek Carruth Oil Company — to create the Pilgrim Oil Company. His latest venture attracted some skeptical attention from financial magazine editors. The Pilgrim Oil Company, “makes a business of gathering in defunct oil companies,” reported Financial World.
As part of his connived merger game plan, stockholders of the two bankrupt Carruth oil ventures had to buy an additional 25 percent of Pilgrim Oil Company shares (in cash) or lose their investments entirely. Carruth used this money to pay dividends, thereby luring more buyers into his petroleum company Ponzi scheme.
Financial World noted, “This is a promoter’s way of reloading old stockholders with additional $25 worth of stock for every $100 they hold in a defunct company.”
J.W. Carruth merged his fraudulent Hogg Creek Carruth Oil with his other fraudulent oil company to create Pilgrim Oil company, a Ponzi scheme using investors’ purchase money to pay dividends and lure more buyers.
In 1923, a federal court indicted J.W. “Hog Creek” Carruth for mail fraud. Also indicted were Pilgrim Oil Company trustees Richardson and Hollister. Eighty-nine other shady characters also were named in a sweeping indictment aimed at stock hucksters.
U.S. Penitentiary, Leavenworth
Federal prosecutors reviewed financial harm to innocent Pilgrim Oil Company shareholders, who pleaded to the court for justice.
“False, fraudulent, and untrue representations were made for the purpose of inducing plaintiffs to buy the said stock of the said two companies, and for the purpose of cheating, swindling, and defrauding plaintiffs out of their money, and did cheat, swindle, and defraud plaintiffs out of their said money,” the attorneys declared.
“That in 1922, and for a long time prior and subsequent thereto, defendant was engaged in handling and selling oil stock certificates and owned and controlled interests in various oil companies and concerns in this state,” the prosecutors added. Dozens of convictions followed.
Carruth earned a one-year sentence in Leavenworth, Kansas. He joined the federal penitentiary’s oil-scheme alumni Dr. Frederick Cook, the fraudulent Arctic explorer turned oil well promoter. Pilgrim Oil Company and the other Carruth company shareholders were left with stock certificates of no value, except perhaps as a family stories and heirlooms.
Convicted felon “Hog Creek” Carruth, who died in obscurity in 1932, should not be confused with former Texas Governor James S. “Big Jim” Hogg, who helped discover the important West Columbia oilfield in 1917 — learn more in Governor Hogg’s Texas Oil Wells.
More articles about U.S. exploration and production companies and links for further research can be found in Oil Stock Certificates.
Recommended Reading (October 9): The Prize: The Epic Quest for Oil, Money & Power (2008); The Extraction State, A History of Natural Gas in America (2021); The Birth of the Oil Industry (1936); Trek of the Oil Finders: A History of Exploration for Petroleum (1975). Your Amazon purchase benefits the American Oil & Gas Historical Society. As an Amazon Associate, AOGHS earns a commission from qualifying purchases.
The American Oil & Gas Historical Society preserves U.S. petroleum history. Join today as an annual AOGHS annual supporting member. Help maintain this energy education website and expand historical research. For more information, contact firstname.lastname@example.org. Copyright © 2021 Bruce A. Wells. All rights reserved.
Citation Information – Article Title: “Exploiting North Texas Oil Fever.” Authors: B.A. Wells and K.L. Wells. Website Name: American Oil & Gas Historical Society. URL: https://aoghs.org/stocks/pilgrim-oil-company-exploiting-oil-fever. Last Updated: June 4, 2022. Original Published Date: September 9, 2021.