Oryx Energy Company
Oryx Energy Company
Sales: $1.39 billion
Stock Exchanges: New York
SICs: 1311 Crude Petroleum & Natural Gas; 1382 Oil & Gas Exploration Services
Oryx Energy Company, headquartered in Dallas, Texas, is one of the world’s largest independent oil and natural gas companies. The company’s main activities include finding, acquiring, developing, and producing oil and gas throughout the world, chiefly in the Gulf of Mexico, the North Sea, Indonesia, and Ecuador.
A relatively young company, Oryx emerged from a reorganization of the Sun Oil Company in 1988. Sun Oil’s earlier roots date back to 1882 when Joseph Pew and E. O. Emerson began the Penn Fuel Company to supply the city of Pittsburgh, Pennsylvania, with energy. Two year later, they sold Penn Fuel and established the People’s Natural Gas Company as new competition in the market.
In 1886, Pew’s nephew, Robert, traveled to Lima, Ohio, to investigate possible oil deposits. A discovery was made, and by 1889 the company was bringing Ohio crude oil to refineries near Lima and Toledo, from which the oil could be shipped to markets in the northeast. During this time, in 1887, the company was renamed the Sun Oil Company, marking the first time the word Sun appeared in the company’s register. In 1894, Sun formed the Diamond Oil Company and purchased for $22,000 the refinery belonging to the failed Crystal Oil Company, based in Toledo, Ohio. Robert Pew became refinery manager.
In 1899, Emerson sold his share in the company to Pew. Two years later, Pew moved quickly to investigate Texan oil fields following the discovery of the famous Lucas Well in the Spin-dletop oil field near Beaumont, Texas. Once again, Robert Pew was dispatched to investigate business possibilities. A month later, he was joined by younger brother J. Edgar. They reported back that abundant, cheap oil was available, and, in 1901, the Pews formed The Sun Company in New Jersey. This new venture was to join in partnership with the United Gas Improvement Company, based in Philadelphia, to ship crude oil from Texas to Pennsylvania. The first shipment arrived aboard a tanker in March 1902 and was unloaded at a refinery on the Delaware River.
Pew’s business strategy was simple and endured for many years in his company: discover new oil deposits and develop economical ways to ship the crude to refineries built near populous areas. In 1911 the Sun Company moved to absorb the Sun Oil Company. Joseph Pew became president, while Arthur E. Pew, J. Howard Pew, and Robert Pew all served as vice-presidents. Frank Cross was secretary-treasurer.
On October 10, 1912, Joseph Pew died of a heart attack. He was succeeded by his son, J. Howard Pew, who would lead the company for the next 35 years. The outbreak of World War I two years later saw the company increase its shipbuilding operation to supply the U. S. military. Sun Ship-Building Company, based in Chester, Pennsylvania, launched its first vessel in October 1917.
By 1918 the United States had 6.1 million cars on the nation’s highways, and the company entered the motor oil business. Sunoco Motor Oil brand products were introduced the following year, and subsidiaries in Canada and the Netherlands were formed to market them overseas. In 1920, the company’s first service station opened in Ardmore, Pennsylvania. Many more openings would follow, and Sunoco products would be advertised nationally in magazines and newspapers. In 1922, the company’s name was changed back to the Sun Oil Company. Additional oil products available in the Sunoco line in future years included Sun Red, a quality lubricant.
On November 12, 1925, 15 percent of stock in the Sun Oil Company was first listed on the New York Stock Exchange. The proceeds of the issue would help build more bulk plants and enlarge distribution facilities. Two years later, the company added a marketing department, headed by Samuel Eckert, to its front office operation. Walter C. Pew became general sales manager. Also during this time, the company’s research and development department came up with a single grade of unleaded, high octane gasoline, which it called “Blue Sunoco.”
The Great Depression hit the Sun Oil Company hard. Sales for the company tumbled from $98 million in 1930 to $69 million a year later. Profits in those years fell to $3.1 million in 1931, against $7.75 million a year earlier. Nevertheless, the company deemed it wise to move ahead with an ambitious capital expenditure program worth $9.5 million in 1931 alone. A pipeline from the Marcus Hook refinery near Cleveland, Ohio, to Syracuse, New York, was completed. The company’s tanker fleet was modernized, and the Sun-Yount-Lee crude pipeline in Texas was built.
By 1939, the Sun Oil Company was producing more than 12.3 million barrels of oil a year, up from 6.7 million barrels a decade earlier. During the Second World War, the company produced fuel for use by the U. S. Air Force and saw four of its ships sunk during wartime service. During the first six months of 1945, the Marcus Hook Refinery was refining and shipping more than 1.1 million barrels of oil a month to the allied effort.
Intensified wartime oil production served the company well after 1945. Oil fields in Louisiana and Texas had been discovered and drilled. Such discoveries were crucial to Sun; without them, their production have would declined.
In 1947, J. Howard Pew stepped aside as president of the company. While remaining a director on the board, he was replaced by the company’s comptroller, Robert G. Dunlop. Joseph Pew, Jr., became the company’s chairperson.
On the transportation side, Sun Oil Company joined with the giant Standard Oil Company, based in Ohio, in 1949, to build the 1,000-mile Texas to Ohio mid-valley pipe line, which provided a new source of crude for the Toledo refinery. In December 1951, all company pipe lines were brought under the umbrella control of the Sun Pipe Line Company, a wholly owned subsidiary to be run by William Kinsolving.
Regarding production, in 1954, Sun Oil Company looked overseas for new crude oil sources. Oil from the Arab Gulf was secured and exploration for added sources was ongoing in Latin America, Pakistan, and the Bahamas. Two wells, pumping 6,000 barrels of oil daily, were successfully drilled in Venezuela in 1957. The company also began drilling for natural gas reserves in the American Midwest.
By 1960, the company was producing more than 54 million barrels of oil annually, some of which came from wells in Canada overseen by a subsidiary office in Calgary. Crude reserves held by Sun totalled nearly one billion barrels. Overall company sales that year topped $755.4 million, producing net profits of $14.7 million.
Committed to product research and development, Sun built an applied physics center at Newton Square, Pennsylvania, in 1956. This center aimed at developed modernized refining processes and applying physics to solving problems in the production and distributions of company products. To develop new oil and petrochemical sources, the company built a $2.5 million research laboratory at the Marcus Hook refinery the following year. By 1958, Sun Oil Company service stations throughout North America offered six grades of Sunoco motor oil to customers.
Attempts at finding natural gas reserves in the North Sea off of Scotland were rewarded in the early 1960s. Similar natural gas finds were made in the Arab Gulf off the coasts of Iran and Dubai. In 1964, work began on the Great Canadian Oil Sands Ltd. plant in northern Alberta. The plant would make synthetic crude from the Athabasca tar sands.
The company’s total net assets topped $1 billion in 1967. Profits that year reached $108.6 million. Sun Oil Company entered a merger with the Tulsa-based Sunray DX Oil Company. The combined operation—employing two divisions, one for manufacturing, marketing, and transportation and the other for exploration and production—began with more than $2 billion in net assets, and profits of $164.4 million in its first year of operation.
The two divisions in 1971 became separate legal companies, Sun Oil Company of Pennsylvania and Sun Oil Company, registered in Delaware. Also that year, J. Howard Pew died and his position on the board was filled by Robert Dunlop. In addition to his new responsibilities as company chairperson, Dunlop continued as chief executive officer until 1974 when he was succeeded by Robert Sharbaugh.
In 1973, the oil industry was shocked by the OPEC oil scandal. Sun and other companies began to operate amid public suspicion of the huge profits they were apparently reaping amid shortages at the gas pump. The price of gas rose, skyrocketing 12-fold by the end of the decade, and the climate produced widespread changes at Sun. In 1975, the company went through a wide ranging restructuring. A new corporate headquarters was built and opened in July 1976. Operations were divided into 14 units, and two property companies were established to watch over the company’s vast real estate holdings. Each operating unit was to be a separate entity, with its own management structure. Thus the company was given flexibility at a time when industry change had become commonplace. Robert Sharbaugh commented at the time that restructuring for Sun would become a “constant.”
In 1976, the company’s name was changed to Sun Company Inc., to reflect the fact that it planned to become more than just an oil company. Sun positioned itself for wider petrochemical and natural gas business opportunities in the years ahead.
Then, in 1979, the oil industry suffered its second shock of the decade when, after the Shah of Iran’s fall from power, the country’s revolutionary government cut off all oil supplies to major oil companies, including Sun. In the mid-1980s the company began developing a 14,000 acre southern Texas oil field called the Pearsall field on the Austin Chalk. Although many rival oil companies had found that their wells in the region were drying up, and, by 1985, Sun’s own wells were producing on average of only five barrels of oil daily, Sun engineers and geologists persisted, developing a horizontal drilling technique working parallel to the oil platform surface. That way, they found natural reservoirs of oil in vertical fractures.
By 1989, the average Pearsall field well was producing 1,300 barrels a day. In November of that year, the Heitz #1 discovery well pumped nearly 3,300 barrels daily and 2.2 million cubic feet of natural gas. At the same time, the falling price of oil led the company to make a $260 million writedown in 1988 on the value of its energy assets. That produced a net loss that year for the company of $305 million, against net earnings of $158 million a year earlier.
On November 1, 1988, Sun Company Inc. spun off the Sun Exploration and Production Company (Sun E&P), which became an independent, publicly owned company. But inevitable confusion resulted between Sun E&P and the Sun Oil Company of Pennsylvania, which refined, marketed, and distributed company products. So, in May of 1989, Sun E&P became Oryx Energy Company in an effort to distinguish the independent operation. Robert Hauptfuhrer, Sun Company president between 1984 and 1986, and now Oryx chair and chief executive officer, argued at the time: “Since Sun markets branded gasoline in the District of Columbia, we have often encountered confusion amidst legislators on Capitol Hill. We are mistakenly being linked with major integrated companies, whose policy views could be different from ours.”
In 1990, Oryx applied its horizontal drilling technology to the Ellenburger field in central Texas, the Bakken shale in North Dakota, and the Californian Midway Sunset field. With only five percent of the world’s oil reserves in the United States, Oryx was also eager at this time to expand its international energy reserves. In January 1990, Oryx paid British Petrolem Plc $1.1 billion for a portfolio of international oil and gas properties. The reserves were found mainly in the North Sea just off the British coastline as well as in Indonesia, Ecuador, Gabon, and Italy.
Also in the 1980s, in response to consumer demand in North America, the company expanded its exploration for natural gas deposits, which it hoped would provide a less expensive and more environmentally sound alternative to oil, coal, and nuclear energy.
By 1986, the company was actively looking in the Gulf of Mexico for natural gas reserves. All in all, 235 offshore blocks and 40 producing platforms were drilled. A year later, the company began to employ a geological exploratory tool using high resolution 3-D seismic soundings to discover deposits. The procedure was able to help Oryx get at reserves previously obscured by features of natural terrain, such as rocky overhangs.
The 1990 Persian Gulf conflict temporarily increased the price of oil worldwide. This was shortlived, however, as was reflected in Oryx’s share price, which opened the year at $44 but slipped back 20 percent at year end to $36. Profits in 1990 for Oryx, however, were favorable. They were posted at $225 million, up from $139 million a year earlier. New drilling for natural gas deposits that year took place in the Mississippi salt domes, the Anadarko and Arkoma basins in the Midwest, and the gas rich Gulf Coast.
In 1991, James McCormick retired as president of Oryx after 38 years with the company. Consequently, Robert Keiser became president and chief operating officer of the company, while Robert Hauptfuhrer remained CEO and chairperson.
That year, company profits fell sharply to $19 million as the world price for oil and natural gas continued under pressure after the end of the Gulf War. As part of a restructuring of Oryx, nonstrategic assets were sold to raise $400 million, much of which went towards easing long-term debt to around $2 billion. In a further attempt to bring down operating costs, 40 percent of the company’s workforce was let go.
Oryx’s difficult trading climate was reflected in its share price, which fell 29 percent during 1991 to $22. The crisis in the oil market did have one benefit for Oryx. A slump in the Dallas property market allowed the company to secure a new headquarters building in the city at an attractive rent level.
For the future, much depends on the price of a barrel of oil, a measure difficult to forecast. The costcutting measures and honing of core activities at Oryx ought to serve the company well as it adjusts to changing operating conditions in the 1990s.
Challenge and Response: The Evolution of Sun Company, 1976; Our Sun, Sun Oil Company Public Relations, Spring 1961; “Oryx Energy Company: New Name Proposed By Sun E&P Board”, Sun E&P news release, March 21, 1989.