Noble Affiliates, Inc.
Noble Affiliates, Inc.
110 West Broadway
P. O. Box 1967
Ardmore, Oklahoma 73402
Fax: (405) 221-1210
Sales: $286.5 million
Stock Exchanges: New York
SICs: 1311 Crude Petroleum & Natural Gas
One of the leading independent energy companies in the United States, Noble Affiliates, Inc. was involved in oil and gas exploration, development, and production through its principal subsidiary, Samedan Oil Corporation. Noble Affiliates’ predecessor began drilling for oil in the United States during the 1920s, then, as the company grew, it expanded its operations into Canada, Tunisia, Equatorial Guinea, and Indonesia. By 1993, the company produced more than 19,000 barrels of oil per day and over 200 million cubic feet of natural gas per day.
The roots of Noble Affiliates stretch back to the 1880s, when two brothers, Sam and Ed Noble, moved to Ardmore, Indian Territory, roughly two decades before the region surrounding Ardmore entered the Union as the state of Oklahoma. Their relocation to Ardmore and the business they opened there, a hardware store, eventually led to the first association of oil with the Noble name, a relationship that would exist for much of the twentieth century, but one that did not begin until approximately 40 years after the two brothers opened their store.
In fact, Sam and Ed Noble would never know of the importance of oil to their family name. Shortly before they died, the two brothers received a farm as payment for a debt to their hardware store, a farm they left to their two widows, Hattie and Eva Noble. The farm itself represented little value, but when oil was discovered on the land its value soared exponentially and provided inspiration for Hattie’s son, Lloyd Noble, then a college student, to enter the oil drilling business.
Lloyd Noble formed a partnership with a young oil driller named Arthur Olson and, after convincing Hattie Noble to cosign a $20,000 loan, the two partners purchased a used, steam-powered drilling rig for $14,000. Noble and Olson drilled their first well in 1921 for the Carter Oil Company, which later became part of Exxon Corporation, on the company’s leased land in Carter County, Oklahoma. After two unprofitable years, their fledgling business began to prosper, thriving in the robust conditions characterizing the oil drilling business in Southern Oklahoma during the 1920s, and enabling the two partners to begin drilling in Alberta, Canada, where they became one of the first oil drillers in the Turner Valley Field in 1928. By the end of the decade, after accumulating 38 oil rigs, Noble and Olson decided to dissolve their partnership and form separate oil drilling companies, with each taking their share of the partnership’s equipment. Their employees were allowed to select which man they wanted to work for, and the two former partners, who would soon be rivals, set out on their own, nine years after they had entered the oil drilling business.
For Lloyd Noble, the 1930s would be a decade of expansion for his company, Noble Drilling Corporation, and a decade that saw Noble broaden the scope of his operations beyond oil drilling to oil production. First Noble focused on increasing the geographic range of his drilling operations and began contracting for oil fields outside of southern Oklahoma in west and east Texas and in New Mexico, the origins of the company’s West Texas division. In 1931, one year after Noble and Olson went their separate ways, an oil rig was moved to Worland, Wyoming, the company’s first entrance into the Rocky Mountain region, and later that same year a rig was established in Bridger, Montana, where Noble developed a recently discovered oil field for the Ohio Oil Company. The following year oil rigs were established near Corpus Christi and Houston, Texas, and in 1933 the company’s first operation on water was begun in southern Texas, where Noble’s drilling equipment drilled a wildcat well for the Amerada Petroleum Company.
Further expansion followed throughout the decade, including a move into southern Louisiana in 1935 and the establishment of Noble’s first rig on a submersible drilling barge in 1937, but earlier in the decade Noble had diversified into oil production to complement his interests as a drilling contractor and to operate the producing properties he had acquired during his first decade in the oil business. In 1932, Noble formed a second company, naming it Samedan Oil Corporation in tribute to his three children, Sam, Ed, and Ann. Samedan first began operating in Carter County, Oklahoma, the same county in which Noble and Olson had drilled their first well, in an oil field called Wildcat Jim. Production of other wells soon followed, when Samedan’s presence was extended into Texas, and several other producing companies were formed and then either sold or merged into Samedan.
With these two companies, Noble Drilling Corporation and Samedan Oil Corporation, combined with the producing properties he had acquired, Lloyd Noble had created a small yet viable oil company, an independent in a market dominated by much larger oil concerns. The company prospered throughout the 1930s and into the 1940s. Noble’s death in 1950 devolved ownership of much of Noble Drilling’s and Samedan’s stock, as well as all of Noble’s producing properties, to The Samuel Roberts Noble Foundation, a charitable foundation Lloyd Noble had formed several years before his death and named in memory of his father.
After Noble’s death, the two companies operated as wholly owned subsidiaries of the Noble Foundation, with the producing properties organized as a separate collection of assets. In accordance with tax law changes, the producing properties were transferred to Samedan in 1954, which bolstered Samedan’s revenues and enabled the company to begin prospecting for oil and gas, an activity Samedan engaged in vigorously during the 1950s. Two years before the producing properties were transferred to Samedan, an exploration and production office was opened in Midland, Texas, and then three additional offices were established later in the decade, one in Lafayette, Louisiana, in 1955, and one each in Oklahoma City, Oklahoma, and Calgary, Canada, in 1958.
By the end of the 1950s, the properties controlled by the Noble Foundation were involved in oil and gas exploration, drilling, and production, giving the trustees of the foundation the synergism it needed to compete against much larger competitors. The complementary relationship between Noble Drilling and Samedan was strengthened in 1957, when the Noble Foundation purchased an interest in an oil field trucking company named B.F. Walker, Inc. that provided the Noble Foundation with a fleet of vehicles to move the drilling and production equipment utilized by Noble Drilling and Samedan. Three years later, B.F. Walker’s remaining stock was purchased when the trucking company’s founder retired, giving the Noble Foundation three subsidiary companies to chart its future in the oil industry.
As the foundation entered the 1960s, the oil industry was changing, and unfortunately for those parties with investments in it, change during this decade meant a change for the worse. Depressed oil and gas prices began to have a similar effect on the industry, signaling the end of the oil boom years during which Noble Drilling and Samedan had emerged and prospered. From 1955 to 1971 the number of active rotary drilling rigs in the country dropped by more than 60 percent, plummeting from 2,686 to 976, which hampered growth for many oil companies and particularly for small independent companies like Noble Drilling and Samedan. But Noble Drilling and Samedan enjoyed several benefits its larger competitors did not, the first being its size and the manner in which the companies operated. Division managers controlled, to a large extent, the field operations and exploration activities for both companies, giving Noble Drilling and Samedan enviable agility during a period when the ability to halt, relocate, or start operations quickly was crucial. Both companies also benefitted from their unique position as subsidiaries of a charitable organization, which allowed them to retain their equipment and continue exploration activities despite economic pressures that otherwise would have forced them to liquidate certain assets. Aside from the revenues generated by Noble Drilling, Samedan, and B.F. Walker, the Noble Foundation possessed sufficient producing assets to remain solvent without contributions from its oil interests, enabling each of the three oil and gas subsidiaries to withstand the debilitative effects of a depressed oil and gas market.
The 1960s, however, would be the last decade the three companies would be organized as such. In 1969, a tax reform provision passed by the U.S. Congress stipulated that charitable foundations could no longer own more than 20 percent of any corporation or commercial enterprise, which left the trustees of the Noble Foundation with two choices: either divest themselves completely of Noble Drilling, Samedan, and B.F. Walker, or combine their assets and then sell 80 percent of the stock to the public. The trustees opted for the latter, and formed Noble Affiliates, Inc. later that year, with the first public stock offering following three years later.
The Noble Foundation gradually relinquished the majority of its ownership of the three companies throughout the 1970s, a decade during which Noble Affiliates’ annual revenues leaped from $38 million to $214 million, more than quintupling as each of the three subsidiary companies recorded encouraging physical and financial growth. Noble Drilling purchased 18 oil rigs during the decade, and Samedan made significant oil and gas discoveries, particularly in Texas, Oklahoma, and Alberta, Canada. Its offshore exploration activities, which began in 1968 in the Gulf of Mexico near Galveston, Texas, were strengthened considerably during the decade, extending the company’s offshore presence from Louisiana to Corpus Christi, Texas. To support the company’s larger geographic area of service, B.F. Walker purchased two trucking companies during the decade, which combined added 16 mideastern states and 16 western states to the company’s licensed area of operation.
Although each of the companies demonstrated strong performances during the 1970s (B.F. Walker generated nearly as much revenue by itself at the end of the decade as all three companies had at the beginning of the decade), it would be the last decade all three operated under Noble Affiliates’ purview. Influenced by changing conditions in the oil industry that made drilling increasingly expensive, Noble Affiliates’ management decided to steer the company away from a diversified stake in the oil market and to concentrate primarily on its investments in oil and gas exploration and production. For Noble Drilling and B.F. Walker this decision appeared to portend the end of their existence as Noble Affiliate subsidiaries, as the parent company began to funnel the bulk of its resources toward Samedan. In 1983, after allocating approximately 90 percent of its capital expenditures to Samedan, Noble Affiliates derived nearly 70 percent of its revenues from oil and gas operations and the balance from contract drilling and its trucking operations. This was a significant shift in the parent company’s distribution of capital outlays, which for the ten previous years had been roughly a 60 percent to 40 percent split between Samedan and Noble Drilling, and was indicative of the course Noble Affiliates would pursue in the future.
B.F. Walker was sold late that year, in December 1983, and Noble Drilling was spun-off to shareholders two years later, leaving Noble Affiliates with one principal subsidiary and one business line to pursue. After shedding Noble Drilling, the company strengthened its oil and gas reserves in 1986 by purchasing domestic oil and gas properties from eight subsidiaries of Texas Eastern Corporation for $176 million. These acquisitions helped lift Noble Affiliates’ oil reserves ten percent and its natural gas reserves 23 percent for the year. Additional oil and gas acquisitions followed throughout the late 1980s, as the company endeavored to increase its stake in oil and gas exploration after dividing its energies and funds for the bulk of its existence. In 1988, Noble Affiliates entered into a joint venture with Apache Corp. to acquire Natural Gas Clearinghouse, an independent gas marketing company that sold roughly 2 billion cubic feet of gas per day at the time of the acquisition. The joint venture with Apache gave Noble Affiliates, through one if its subsidiaries, Noble Natural Gas, Inc., a 50 percent interest in Natural Gas Clearinghouse and a significant boost to the company’s natural gas assets. After strengthening this segment of its business, Noble Affiliates increased its investments in oil the following year, when Samedan purchased an interest in four producing properties in the Gulf of Mexico for $8.1 million.
Noble Affiliates acquired interests in other oil and gas fields, purchasing domestic onshore and offshore properties as well as international properties located in Equatorial Guinea, Indonesia, and Tunisia, where the company began exploration activities during the 1970s. Part of the company’s reason to concentrate on oil and gas exploration and production rather than drilling was the relatively lower costs involved in exploration and production. This was particularly true in the early 1990s, when some of the larger oil concerns, such as Amoco and Chevron, began selling domestic assets to finance international exploration. Operating as a medium-size, independent company, Noble Affiliates was able to strategically acquire such properties and bolster its holdings in natural gas and oil exploration and production.
Buoyed by this trend in the oil industry during the early 1990s, Noble Affiliates in 1993 eclipsed, for the first time, its revenue total recorded in 1984, the year before the Noble Drilling divestiture. After spinning-off Noble Drilling, Noble Affiliate’s sales total fell from $270 million to $170 million, then slipped the following year, in 1986, to $122 million. From this level, the lowest in a decade, the company effected a slow recovery, fueled largely by the series of oil and gas acquisitions during the late 1980s, and reached $278 million by 1993, a year that also marked a substantial increase in the company’s oil and gas reserves. The oil and gas reserves increase was the largest in the company’s history. The company’s natural gas reserves increased from 372.2 billion cubic feet to 691.5 billion cubic feet during the year and oil reserves jumped from 47.4 million barrels to 73 million barrels.
With these substantially improved reserves, Noble Affiliates entered the mid-1990s with plans to continue acquiring additional gas oil properties. The company spent $515 million on such acquisitions during 1993 and maintained sufficient cash balances to fund $100 million worth of acquisitions in 1994. As it charted its future, Noble Affiliates looked to increase its oil and gas reserves and production totals principally in the major basins of the Gulf of Mexico.
Samedan Oil Corp.; Samedan Oil of Canada, Inc.; Samedan North Sea, Inc.; Samedan Oil of Indonesia, Inc.; Samedan Pipeline Corporation.
Dorfman, John R., “Oil Explorers’ Pump Primed by Investors,” Wall Street Journal, January 3, 1991, p. Cl.
“Noble Affiliates, Apache Deal,” Wall Street Journal, May 19, 1989, p. A7C.
“Noble Affiliates Inc.,” Wall Street Journal, June 23, 1993, p. B4.
“Noble Affiliates, Inc.,” Wall Street Transcript, October 29, 1984, p. 75, 726.
“Noble Affiliates Reserves Rose,” Wall Street Journal, February 9, 1987, p. 2.
Nully, Peter, “Cashing In on the Big Oil Auction,” Fortune, November 30, 1992, p. 30.
Solomon, Caleb, “Two Oil Firms Weigh Buying U.S. Reserves,” Wall Street Journal, March 19, 1992, p. A5.
—Jeffrey L. Covell