SIZING UP AN OIL COMPANY Since the signing of the Armistice in 1918, there has been an unprecedented period of wild speculation in the petroleum indus try, accompanied by all manner of reckless spending and big promotions. Thousands of new companies have been formed, a large majority of thein selling stock, and 99 per cent' of them doomed to failure. Even large corporations have had no easy time.
In analyzing an oil company, use common sense. Oil com panies are in no way different from other industrial organizations. Unfortunately public thinks of the oil business as a wild speculation and plays it as they would a game of cards. That idea is all wrong. The elements of value in any oil stock may be quickly analyzed. Everything depends upon the personnel of the company. The word "personnel" covers a wide field. Given an individual or group of men, and he or they will make or break an oil company. The man or men at its head must be good executives and command capital. With this combination success is assured and it is important to know that there has been no failure of a company headed by a good executive.
In investigating any company, ascertain who is the individual or the group responsible for its major policy and decisions, and you can rest your judgment on that man or men.
A study of the failures of oil companies shows many causes, varying from extravagance, theft, poor judgment and lack of capital to failure in drilling or in operating. In the last analysis, however, they all fall back to faulty management. The personal equation predominates largely, here as in every business. Sys tem, routine—all—are merely aids to the free activities of the men who are running the enterprise.
Analyze the men at the top. The only recommendation for many oil companies is a list of the stockholders and the officers who are ostensibly at their head. Often such a list means very little. Men may command millions, but if there is not a man of proven ability who is also vitally interested in the success of the venture in active charge failure is unavoidable, unless by some freak of fortune the Gods relent and allow it to succeed.