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REMARKS TO LBJ SCHOOL OF PUBLIC AFFAIRS FORUM
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4:00 P.M.
(20 MIN.)
I. THANK YOU, MAX.
A. IT’S A PLEASURE TO BE IN AUSTIN TODAY.
B. (PERSONAL COMMENTS, HUMOR)
[Text stricken: C. (USE LETTER FROM U.T. STUDENT, WHICH WILL FOLLOW THIS PAGE).]
C. JIMMY LEE WAS INVITED TO ATTEND AND GIVE HIS SIDE OF THE [Text stricken: STORY.] [Handwritten addition: issue.]
[Handwritten addition: (4 times they have been invited)]
E. WE, AS THE LARGEST SHAREHOLDERS OF GULF, ARE ALWAYS INTERESTED IN HEARING WHAT HE HAS TO SAY.
F. NO DOUBT OTHERS OF YOU WOULD HAVE BEEN INTERESTED, TOO.
G. HOWEVER, MR. LEE DECLINED THE INVITATION, [Text stricken: AND I DON’T BELIEVE HE’S HERE TODAY.]
H. BUT IF THERE IS A GULF REPRESENTATIVE ATTENDING, I WOULD BE HAPPY TO LET YOU HAVE A CHANCE TO MAKE A REBUTTAL OR ASK A
QUESTION AFTER I CONCLUDE MY REMARKS.
[Handwritten addition: (Texarkana—Port Arthur Chamber of Commerce—recording devices)]
II. I’D LIKE TO VISIT WITH YOU TODAY ABOUT WHAT IS HAPPENING IN THE OIL AND GAS INDUSTRY.
A. THE INDUSTRY HAS BEEN IN THE MEDIA SPOTLIGHT FOR SEVERAL MONTHS NOW.
[Handwritten addition: I might add—A different spotlight than the one we had on us a few years ago.]
B. AND IT SEEMS THAT ALMOST EVERYONE HAS SOMETHING TO SAY ABOUT THE POTENTIAL EFFECTS OF MERGERS, ACQUISITIONS AND OTHER
RESTRUCTURING ACTIVITY.
C. IN FACT, THERE’S BEEN A LOT OF FLAG-WAVING LATELY RELATING THE RESTRUCTURING PROCESS WITH U.S. ENERGY SECURITY.
D. WHAT MOST OF THE TALK BOILS DOWN TO IS THIS: WILL CURRENT RESTRUCTURING ACTIVITY JEOPARDIZE THE UNITED STATES’ ENERGY FUTURE?
E. AND THE ANSWER IS NO. . .BECAUSE THE RESTRUCTURING OF THE INDUSTRY WILL RESULT IN MUCH MORE EFFICIENT AND VIABLE COMPANIES.
F. THAT CAN ONLY BE BENEFICIAL. . .FOR THE COMPANIES AND SHAREHOLDERS INVOLVED AND FOR THE NATION AND CONSUMERS, AS WELL.
III. THE CRUX OF THE PROBLEM—THE CATALYST THAT, IN PART, IS TRIGGERING RESTRUCTURING—IS POOR INDUSTRY PERFORMANCE.
A. OIL AND GAS COMPANIES MANAGE DEPLETABLE ASSETS—THEIR RESERVES OF OIL AND GAS.
B. IF THEY DEPLETE THOSE ASSETS WITHOUT REPLACING THEM, THEY ARE DEPLETING THE STOCKHOLDERS’ ASSET BASE AND, IN ESSENCE, LIQUIDATING
THEMSELVES.
C. THIS IS A LONG-STANDING PROBLEM IN THE INDUSTRY.
1. SINCE 1970, U.S. RESERVES OF OIL AND GAS HAVE BEEN DECLINING.
2. AND IN 1982, ALONE, ONLY 47% OF THE CRUDE 0IL PRODUCED WAS REPLACED.
3. LET ME SAY THAT AGAIN—LESS THAN HALF OF THE CRUDE OIL PRODUCED IN 1982 WAS REPLACED.
4. I USE 1982 FIGURES BECAUSE THAT IS THE LAST YEAR WHICH WE HAVE COMPLETE DATA ON.
5. WAIT UNTIL YOU SEE 1983’s FIGURES.
[Handwritten addition: Down even further.]
IV. THE QUESTION FOR MANY PEOPLE IS WHY THE INDUSTRY DIDN’T REPLACE ITS RESERVES DURING THE DRILLING BOOM OF THE 70s, WHEN
TIMES WERE GOOD AND OIL COMPANIES WERE FLUSH WITH CASH.
A. AND THAT’S A VALID QUESTION FOR CONSUMERS TO ASK.
B. WHEN YOU BREAK IT DOWN YOU DISCOVER THAT THE INDEPENDENT OIL COMPANIES USUALLY REPLACED RESERVES WHILE THE MAJOR OIL COMPANIES
OFTEN DIDN’T.
[Handwritten addition: (Give quick review of what the majors were up to from 1950 to 1870.)]
C. DURING THE DRILLING BOOM, THE MAJOR OIL COMPANIES HAD A LOT OF CASH BUT NOT ENOUGH GOOD PROSPECTS TO DRILL.
D. SO THE MAJORS TOOK [Text stricken: THE CASH AND INVESTED. . .INTO EVERYTHING] [Handwritten addition: some of their cash and attempted diversification] FROM NEWSPAPERS TO DEPARTMENT STORES TO OFFICE EQUIPMENT. [Handwritten addition: all resulted in failure.]
E. [Text stricken: MUCH OF THEIR CASH WENT TO NON-OIL AND GAS RELATED BUSINESSES, AND THAT’S STILL TRUE TODAY.]
V. A CASE IN POINT IS GULF OIL.
A. OVER THE LAST 5 YEARS, GULF HAS SPENT $15.6 BILLION.
B. BUT ONLY 40% OF THAT AMOUNT WENT TO U.S. OIL AND GAS EXPLORATION AND DEVELOPMENT.
C. THE OTHER 60% WENT TO FOREIGN ACTIVITIES, DOWNSTREAM OPERATIONS AND NON-ENERGY RELATED VENTURES.
D. DURING THAT SAME PERIOD OF TIME, GULF’S U.S. RESERVE REPLACEMENT WAS 43%.
E. LOTS OF CASH—[Text stricken: LITTLE] [Handwritten addition: low] REPLACEMENT.
F. AND THE STOCKHOLDER WAS DECEIVED BY GULF’S PERFORMANCE BECAUSE MANAGEMENT KEPT RAISING THE DIVIDEND. [Handwritten addition: But raised salaries in 1977, the T.A.S.B. recommended that oil companies be required to disclose reserves annually. This
was adopted by the S.E.C. and required for the year 1979. MESA began disclosing reserves to stockholders in 1973—6 years
earlier.]
[Handwritten addition: Where would the poor stockholder be today if the S.E.C. had not required oil companies to publish their reserves?]
[Handwritten addition: (Give Harold Dunn story in late ’60s.)]
[Handwritten addition: Gulf is not alone with its problems.]
VI. SIMILAR PROBLEMS OF VARYING DEGREES EXIST THROUGHOUT THE MAJOR INTEGRATED OIL COMPANIES.
A. DURING THE 70s, DECREASED RESERVE REPLACEMENT AND RISING FINDING COSTS WERE COVERED UP BY INCREASING OIL PRICES.
B. BUT TODAY’S STABILIZED OIL PRICES AND LACK OF GAS MARKETS HAVE HIGHLIGHTED THE PROBLEM FOR MANAGEMENTS AND ESPECIALLY FOR
SHAREHOLDERS.
C. SHAREHOLDERS ARE BEGINNING TO WAKE UP TO THE FACT THAT THEIR ASSETS HAVE BEEN POORLY MANAGED.
D. THEY’RE BEGINNING TO SEE WHAT LARGE AMOUNTS OF MONEY HAVE BEEN SPENT AND HOW LITTLE THEIR RETURN HAS BEEN.
VII. LET ME USE GULF AS AN EXAMPLE.
A. THE $15.6 BILLION OF EXPENDITURES THAT I MENTIONED EARLIER REPRESENTS $95 PER CURRENT SHARE THAT GULF HAS INVESTED OVER
THE LAST 5 YEARS.
B. BUT THE VALUE OF THE STOCK HAS ONLY RISEN BY $11.
C. I’D BETTER QUALIFY THAT: SINCE THE [Handwritten addition: explain GIG] [Handwritten addition: (]GULF INVESTORS GROUP[Handwritten addition: )] ENTERED THE PICTURE, THE VALUE HAS RISEN QUITE A BIT MORE.
D. BUT THAT INCREASE ISN’T DUE TO ANY ACTION MANAGEMENT HAS TAKEN AND IT ISN’T THE RESULT OF $15.6 BILLION BEING SPENT OVER
THE LAST 5 YEARS.
E. INSTEAD THE VALUE OF THE STOCK HAS RISEN ON THE REALIZATION THAT SOMEBODY IS VERY SERIOUS ABOUT MOVING THE MARKET PRICE
CLOSER TO THE [Text stricken: TRUE VALUE OF THE ASSETS.] [Handwritten addition: appraised value of $114.]
VIII. WHEN YOU LOOK AT HOW GULF MANAGEMENT HAS SPENT SHAREHOLDERS’ MONEY, IT IS NOT SURPRISING THAT THE STOCK HAS ONLY RISEN
$11 A SHARE.
A. THEY SEEM TO SPEND A LOT OF TIME AND MONEY WORKING AGAINST THEIR SHAREHOLDERS.
B. THE RECENT PROXY FIGHT WHICH WAS DESIGNED TO TAKE AWAY SHAREHOLDER RIGHTS, COST ABOUT $10 MILLION.
C. THEY HIRED PRIVATE DETECTIVES TO FOLLOW MESA PEOPLE.
D. THEY TRIED TO PRESSURE OUR BANKS SO THAT THEY WOULD NOT PROVIDE FINANCING FOR US TO BUY GULF SHARES.
E. THEY LOBBIED IN WASHINGTON TO GET MORE TAXES PLACED ON ROYALTY TRUSTS.
[Handwritten addition: All moves against stockholders.]
F. AND LAST FRIDAY, THEY FILED A LAWSUIT AGAINST THEIR LARGEST SHAREHOLDER—THE GULF INVESTORS GROUP.
1. THE LAWSUIT IS WITHOUT MERIT AND WILL ONLY COST SHAREHOLDERS MORE MONEY.
2. REMEMBER, GETTY MANAGEMENT FILED A LAWSUIT AGAINST THEIR BIGGEST SHAREHOLDER NOT TOO LONG AGO, AND SEE WHAT THAT GOT FOR
THEM.
[Handwritten addition: How does the lawsuit affect other Gulf stockholders? Their suspicions are now confirmed.]
[Handwritten addition: The central issue is—who owns the company—management or stockholders?]
[Handwritten addition: Managements in these situations can’t go very long before they show their true colors and it’s all due to their training.
Are not stockholders.]
[Handwritten addition: Just plain old Prof. Managers.]
G. THE MANAGEMENT THAT OWNS LESS THAN 1% OF THE STOCK IS SUING [Text stricken: SOMEONE—US—] [Handwritten addition: the people]—WHO [Text stricken: IS] [Handwritten addition: are] TRYING TO REALIZE VALUE FOR THE OTHER 99% OF THE SHAREHOLDERS.
H. IF GULF MANAGEMENT HAD TO PAY FOR THIS LAWSUIT WITH THEIR PERSONAL MONEY, YOU CAN BET IT WOULD NEVER HAVE BEEN FILED.
I. BUT IT’S NOT THEIR MONEY—IT’S SHAREHOLDERS’ MONEY.
[Handwritten addition: They continue to operate with predictable consistency.]
J. PURSUING THIS LAWSUIT WILL BE ABOUT AS PRODUCTIVE FOR GULF SHAREHOLDERS AS THE TWO DRY HOLES THAT GULF DRILLED IN THE BEAUFORT
SEA.
[Handwritten addition: (Pause)]
IX. SHAREHOLDERS ARE BEGINNING TO TAKE A HARD LOOK AT THEIR COMPANIES’ PERFORMANCE, AND WONDERING IF SOME CHANGES AREN’T IN
ORDER.
A. THE ANSWER FROM MOST MANAGEMENTS IS NO—NO CHANGES ARE NECESSARY. LET’S MAINTAIN THE STATUS QUO.
B. BUT SHAREHOLDERS—WHO I MIGHT ADD HAVE LEARNED A LOT ABOUT THE INDUSTRY IN THE LAST FEW MONTHS—ARE BEGINNING TO ASK WHY
THE SYSTEM SHOULD BE PERPETUATED.
C. DO WE KEEP THE SYSTEM BECAUSE IT WORKS?
D. IS BIG OIL’S SYSTEM WORKING?
E. THE ANSWER IS “NO” IN LIGHT OF POOR RESERVE REPLACEMENT AND LAGGING MARKET VALUES FOR STOCK.
F. SO WHY ARE WE PERPETUATING THE SYSTEM?
G. THE ANSWER IS PRETTY SIMPLE, AND I’LL USE THE WORDS OF WILLIAM RANDOL, AN OIL ANALYST WITH FIRST BOSTON CORPORATION:. .
.QUOTE. . .“OILMEN ARE EMPIRE BUILDERS.”
X. MANY EXECUTIVES ARE SIMPLY CARETAKERS WHO ARE MORE INTERESTED IN BONUSES POWER AND PERKS THAN THEY ARE WITH MAKING SURE
THE SHAREHOLDER GETS FAIR VALUE.
A. AND THE REASON IS THAT MOST MANAGEMENTS AREN’T SHAREHOLDERS, THEMSELVES.
B. AT GULF FOR INSTANCE THE TOP 3 OFFICERS IN THE COMPANY OWN LESS THAN ONE-TENTH OF 1% OF THE OUTSTANDING SHARES.
C. AND JAMES LEE, THE CHAIRMAN OF GULF, OWNS ONLY 21,000 SHARES.
D. SHAREHOLDERS HAVE BEGUN TO SEE THAT CARETAKER MANAGEMENTS WITH LITTLE STOCK OWNERSHIP ARE MORE INTERESTED IN EMPIRE-BUILDING
THAN SHAREHOLDER VALUE.
E. YOU HAVE TO REMEMBER THAT IN MOST CASES, THESE MANAGEMENTS ARE SIMPLY PROFESSIONAL ADMINISTRATORS.
F. THEY RUN AN ORGANIZATION THAT WAS ALREADY IN EXISTENCE WHEN THEY MOVED INTO THE JOB.
G. THEIR OWN MONEY AND INTEREST ARE NOT AT STAKE, SO THEY DON’T RELATE TO THE STOCKHOLDERS.
(PAUSE)
[Handwritten addition: In an article published recently concerning yardsticks of management performance in the energy industry, Gulf was ranked last over the last five years in all categories of performance evaluated among the international oils.]
[Handwritten addition: Significantly—Gulf had a 5-year average return on equity of only 12.9%—less than half that of the top performing international.]
[Handwritten addition: —Gulf had a 5-year average growth in sales of only 9.4%—again, less than half that of the top performing international.]
[Handwritten addition: And. . .The international oils had worse performance over the last five years than the other oil and gas entities evaluated by Forbes.]
[Handwritten addition: Therein lies the reason that a royalty trust—which I’ll talk more about later—makes sense for Gulf when it may or may not make sense for other oil and gas entities.]
[Handwritten addition: As a result of Gulf’s management performance, a Gulf shareholder could sell his equity interest in Gulf for only 50-60% of his net book value and only 30-40% of his appraised worth—prior to the Gulf investor’s group investment in Gulf.]
[Handwritten addition: A Gulf Royalty trust—by returning control over reinvestment of a significant portion of Gulf’s cash flow to the Gulf shareholder—would permit them to realize: One. . .the full book value and more of their equity investment in Gulf. . .And two. . .a significantly greater percentage of the appraised worth of Gulf’s net assets.]
XI. SO THERE ARE TWO VERY VALID REASONS FOR INDUSTRY RESTRUCTURING—POOR INDUSTRY PERFORMANCE IN TERMS OF RESERVE REPLACEMENT.
. .AND GROWING SHAREHOLDER DISCONTENT.
A. RESTRUCTURING IS GOING TO TAKE A LOT OF FORMS, AND AS WE PROGRESS, NEW TOOLS WILL BE INTRODUCED.
B. BUT THE FORMS IN THE SPOTLIGHT TODAY ARE MERGERS ACQUISITIONS AND THE ROYALTY TRUST.
XII. UNDER A MERGER OR ACQUISITION, THE IDEA IS THAT IT’S CHEAPER TO BUY RESERVES IN THE GROUND THAN IT IS TO EXPLORE FOR
THEM.
A. BUT IT SHOULD BE NOTED THAT WITH A MERGER OR ACQUISITION, A COMPANY USUALLY INCREASES THE SIZE OF ITS RESERVE BASE SIGNIFICANTLY.
B. IF IT HAD TROUBLE REPLACING ITS OWN RESERVES, IT WILL UNDOUBTEDLY COMPLICATE ITS TASK BY ENLARGING THE SIZE OF THE RESERVE
BASE.
C. STILL I SEE NOTHING WRONG WITH MERGER/ACQUISTION ACTIVITY IF—AND I UNDERLINE IF—MANAGEMENT IS WILLING TO TAKE THE STEPS
NECESSARY TO MAKE THE COMBINED, LARGER ENTITY VIABLE.
D. THAT MAY MEAN TAKING ACTION TO TRIM MARGINALLY OR OUTRIGHT UNPROFITABLE OPERATIONS, AND IT MAY MEAN DOWNSIZING THE RESERVE
BASE THROUGH A SPIN-OFF, SUCH AS A ROYALTY TRUST.
XIII. A ROYALTY TRUST TAKES A PORTION OF THE RESERVE BASE AND PLACES IT IN THE HANDS OF STOCKHOLDERS. [Handwritten addition: —the owners.]
A. CASH FLOW FROM THE PRODUCING PROPERTIES IS CHANNELED DIRECTLY TO STOCKHOLDERS.
B. THEY RECEIVE A GREATER RETURN ON THEIR INVESTMENT, AND MANAGEMENT NOW HAS A RESERVE BASE WHICH IS AT A SIZE MUCH MORE EASILY
MAINTAINED.
C. THE REMAINING CASH FLOW [Text stricken: IS] [Handwritten addition: should be] MORE IN LINE WITH [Text stricken: GOOD] INVESTMENT OPPORTUNITIES.
D. AND NEW DISCOVERIES HAVE A MORE MEANINGFUL IMPACT ON THE RESERVE BASE.
E. AS A RESULT, MANAGEMENT HAS A MUCH BETTER SHOT AT REPLACING RESERVES AND SHAREHOLDERS GET A BETTER RETURN ON THEIR INVESTMENT.
[Handwritten addition: F. And remember—oil and gas prospects that are economically sound will have ample capital available.]
[Handwritten addition: G. A point worth of clarification is that under a royalty trust, management maintains total control of oil & gas production.
There is no problem for downstream operations or personnel.]
XIV. WE’VE ASKED GULF TO DISTRIBUTE TO THEIR STOCKHOLDERS A 50% ROYALTY TRUST WHICH WOULD CHANNEL $740 MILLION TO THEIR STOCKHOLDERS
IN THE FIRST YEAR.
A. GULF HAS TURNED US DOWN ON THE PROPOSAL.
B. AND ONE OF THE ARGUMENTS THAT MR. LEE GAVE IN A RECENT SPEECH WAS THAT THE ROYALTY TRUST CONCEPT WOULD. . .QUOTE. . .“REDUCE
OUR SUPPLY OF DOMESTIC OIL AND GAS AND WEAKEN OUR NATION. THIS COUNTRY NEEDS A HEALTHY OIL INDUSTRY, ONE THAT CAN REINVEST
IN THE FUTURE AND COMPETE IN WORLD MARKETS SO WE’RE NOT AT THE MERCY OF FOREIGN OIL PRODUCERS.”
C. HE ALSO SAID THAT. . .QUOTE. . .“THE NATION’S MANAGEMENTS, SHAREHOLDERS, CONSUMERS, CAPITAL MARKETS AND GOVERNMENT SHOULD
WAKE UP AND REALIZE THAT ANY ACTION THAT SAPS THE STRENGTH OF OUR BASIC INDUSTRY WILL COST DEARLY IN THE LONG TERM.”
D. I’LL AGREE WITH MR. LEE ON TWO POINTS:
E. ONE. . .THIS COUNTRY DOES NEED A HEALTHY OIL INDUSTRY.
F. AND TWO. . .ANY ACTION THAT SAPS THE -STRENGTH OF THE INDUSTRY WILL COST US DEARLY.
G. BUT MAINTAINING THE STATUS QUO IS THE ACTION THAT GOT US INTO THE FIX WE’RE IN NOW.
H. IT’S COSTING STOCKHOLDERS AND CONSUMERS DEARLY TODAY.
I. OUR INDUSTRY ISN’T HEALTHY AND IT’S TIME TO MAKE SOME CHANGES.
(PAUSE)
XV. LEE CONSIDERED THE DECEMBER 2 GULF SPECIAL SHAREHOLDERS MEETING AS A REFERENDUM ON THE ROYALTY TRUST, EVEN THOUGH THE
COMPANY’S REINCORPORATION WAS ON THE ACTUAL BALLOT.
A. GULF HAS SAID THE VOTE “THOROUGHLY DEBUNKED” THE ROYALTY TRUST CONCEPT.
B. BUT THERE’S SOME INTERESTING DATA BEING RELEASED TODAY THAT DISAGREES WITH MR. LEE’S CONCLUSIONS.
C. MESA COMMISSIONED THE TORTORELLO CORPORATION, A NEW YORK PUBLIC OPINION FIRM, TO SURVEY 100 SECURITY ANALYSTS SPECIALIZING
IN THE PETROLEUM INDUSTRY AND ASK THEM VARIOUS QUESTIONS ABOUT THE ROYALTY TRUST CONCEPT.
D. WHEN ASKED WHETHER DISTRIBUTION OF A ROYALTY TRUST WOULD BE GOOD FOR STOCKHOLDERS, 82% SAID IT WOULD.
(82% WOULD BENEFIT; 3% WOULD NOT BENEFIT; 5% DON’T KNOW ENOUGH; 10% NOT SURE)
E. BY A MARGIN OF BETTER THAN TWO TO ONE, SECURITY ANALYSTS PERCEIVED THAT THE ROYALTY TRUST CONCEPT WOULD HAVE A POSITIVE—RATHER
THAN NEGATIVE—EFFECT ON THE OIL AND GAS INDUSTRY.
(48% POSITIVE; 21% NEGATIVE; 31% NO EFFECT OR NOT SURE)
F. AND 51% FELT THAT MAJOR OIL COMPANIES SHOULD DISTRIBUTE ROYALTY TRUSTS.
(51% YES: 32% NO; 17% NOT SURE)
G. SIGNIFICANTLY MORE ANALYSTS FELT THAT A COMPANY’S COMMON STOCK WOULD BE MORE ATTRACTIVE AFTER THE DISTRIBUTION OF A ROYALTY
TRUST THAN THOSE WHO FELT IT WOULD BE LESS ATTRACTIVE.
(46% MORE ATTRACTIVE; 28% LESS ATTRACTIVE: 21% SAME ATTRACTIVENESS; 5% NOT SURE)
H. THE TORTORELLO CORPORATION ALSO HAS COMPLETED A SURVEY OF PETROLEUM INDUSTRY SHAREHOLDERS’ ATTITUDES TOWARD ROYALTY TRUSTS.
I. THE RESULTS OF THAT POLL WILL BE RELEASED SOON BUT I’LL JUST GIVE YOU TWO HIGHLIGHTS.
J. FIRST. . .ACCORDING TO THE POLL, 56% OF THESE PETROLEUM COMPANY SHAREHOLDERS SAID THAT A SPIN-OFF OF A ROYALTY TRUST BY
AN OIL AND GAS COMPANY WOULD BENEFIT SHAREHOLDERS.
(56% WOULD BENEFIT 14% WOULD NOT BENEFIT; 21% DON’T KNOW ENOUGH; 9% NOT SURE)
K. SECOND. . .THESE SHAREHOLDERS ALSO SAID. . .BY A THREE-TO-ONE MARGIN. . .THAT THE ROYALTY TRUST CONCEPT WOULD HAVE A POSITIVE
RATHER THAN A NEGATIVE EFFECT ON THE INDUSTRY.
(46% POSITIVE EFFECT; 14% NEGATIVE EFFECT; 17% NO EFFECT; 23% NOT SURE)
L. IT’S CLEAR THAT ANALYSTS AND SHAREHOLDERS ARE RECEPTIVE TO THE IDEA, AND I BELIEVE THAT GULF SHAREHOLDERS ARE NO EXCEPTION.
M. THE ROYALTY TRUST IS A NEW CONCEPT FOR MOST SHAREHOLDERS, BUT I BELIEVE THAT ONCE THEY UNDERSTAND WHAT A TRUST CAN DO
FOR THE VALUE OF THEIR INVESTMENT AND THE COMPANY’S VIABILITY THEY’LL AGREE THAT IT’S AN IDEA WHOSE TIME HAS COME.
[Handwritten addition: That was, by the way, the title of a Barron’s article on Nov. 28, 1983—“An Idea Whose Time Has Come.”]
XVI. IN CLOSING. I’D LIKE TO URGE EACH OF YOU TO MONITOR WHAT IS HAPPENING IN THE INDUSTRY.
A. BIG AND LASTING CHANGES ARE OCCURRING WHICH AFFECT YOU AS A STOCKHOLDER—IF YOU ARE ONE—AS A CONSUMER, AS A VOTER, AND EVEN
AS A STUDENT.
B. THE STATE OF TEXAS IS CLOSELY TIED TO THE OIL AND GAS BUSINESS. . .THROUGH THE JOBS THE INDUSTRY PROVIDES. . .AND, MORE
IMPORTANTLY, THROUGH THE TAX REVENUES GENERATED BY PETROLEUM-RELATED ACTVITIES.
C. ACCORDING TO THE TEXAS RESEARCH LEAGUE, IN 1983 THE PETROLEUM INDUSTRY IN TEXAS DIRECTLY ACCOUNTED FOR ABOUT 30% OF THE
STATE’S TAX REVENUES.
D. [Text stricken: AND OIL AND GAS REVENUES FROM PRODUCTION ON STATE-OWNED LANDS WHICH GO TO THE PERMANENT SCHOOL FUND AND THE PERMANENT UNIVERSITY
FUND AMOUNTED TO $___MILLION IN 1983.]
E. SO THE STATE HAS MUCH AT STAKE IN WHAT HAPPENS TO THE OIL INDUSTRY.
F. AND EACH OF YOU, AS CITIZENS AND VOTERS, HAVE A LOT AT STAKE, TOO.
G. WITH THE CURRENT ATTENTION BEING FOCUSED ON THE INDUSTRY, IT BECOMES MORE SUSCEPTIBLE TO INCREASED LEGISLATION OR TAXATION
WHICH IT CANNOT AFFORD AT THIS TIME. . .WHEN IT’S STRUGGLING TO GET BACK ON ITS FEET AND BECOME VIABLE AGAIN.
[Text stricken: H. SO BE INFORMED ABOUT THE CHANGES OCCURRING IN THE INDUSTRY, AND IF YOU’RE CONCERNED, LET YOUR CONGRESSMAN KNOW ABOUT IT.]
I. THIS IS AN ISSUE ABOVE PARTISAN POLITICS.
(PAUSE)
XVII. THE INDUSTRY IS UNDERGOING IMPORTANT CHANGES WHICH WILL AFFECT SHAREHOLDERS AND CONSUMERS.
A. AND IT’S IMPORTANT THAT THE CHANGES COME FROM THOSE WITHIN THE INDUSTRY[Handwritten addition: .] [Text stricken: WHO AREN’T AFRAID TO DO WHAT’S NECESSARY.]
B. [Text stricken: NOW I’LL BE GLAD TO TAKE QUESTIONS FROM THE FLOOR.]
[Handwritten addition: (one more page)]
[Handwritten addition: If we don’t step up to the problem and solve it from within, we can expect—and with good reason—that the consumer will lead the charge and the industry will be restructured from the outside—by Government.]
[Handwritten addition: Now I’ll be glad to take questions from the floor.]