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	REMARKS TO ABILENE CHRISTIAN UNIVERSITY ABILENE TX APRIL 2, 1984

It’s always great to come to Abilene. Everybody’s so nice to me here when I come. When Bob Hunter asked me to come, I was...I think I answered before he even got through telling me what he wanted me to do.

One thing that you could really help us with today is that we have some packets here, and we thought we were going to be in a proxy fight with Gulf at this point. We had a nice article that was written about us in Fortune magazine back in December, and one of our plans was to have a number of those magazines and be able to pass them out to the Gulf stockholders. And, we are trying to get rid of them pretty fast. (Laughter) If you’d just trash them, it will be all right. Somebody said tell them that you thought you ordered a hundred but you got a hundred thousand of them. (Laughter) Anyway, we’ve got a bunch of them. If you’d just take them I’d appreciate it.

Something that I would like to clarify. . .Bob left a little bit in doubt there about a political candidate. I’m not a political candidate. There have been comments made about that, and my banker the other day said don’t make the mistake of getting caught. I said, “Why is that.” And he said, “You owe us too much money.” That stopped that for me, and everything came back to reality. You mentioned the Gulf people that came in to meet down at the LBJ School. Bob doesn’t know this, but the fellow that came in from Gulf. . .and we always offer, are there any Gulf people here today. If there are, I’ll be glad to give equal time. And that’s what I told them down there. This fellow stood up. He said I’m Gene            with Gulf Oil. I’m the chief lobbyist in Austin. And he said I would like to have the microphone when you get through. And he came up and spoke right on about 10 minutes wasn’t it Bob? I found his remarks to be very interesting. Two weeks later, I had a stockbroker in Austin tell me that Gene           is now a stockholder of Mesa Petroleum. So I felt like I did sell my story to that Gulf employee.

Let me kind of bring you up to date the evolution of what’s happened here, and it’s interesting the way it all started. And let me tell you kind of how we analyze Gulf and where we got in the position that we were in.

But it was January 22, 1981, I believe, that Jim Lee, the CEO of Gulf made a speech. He said there that he wanted to maximize the values for all the Gulf stockholders—and that was not foreseen value, that was real value. And I felt from that speech. . .and I know Jim Lee. I got to know him quite a bit better here recently. (Laughter) But I felt like that he was on the same track that we were—that there were a lot of companies in our industry in the United States that are actually depleting reserves and not replacing them. And that is the primary asset of the stockholders, are the reserves of oil and gas.

And Gulf was on such a trend. For 12 straight years they had not been able to replace their reserves. So you could just line up their points. . .I mean out of their annual report. . .and that I told Jim Lee, I said, “Jim, you’d have to admit that 12 years of non-replacement has to be a trend.” And he agreed that 12 years was a trend.

And I felt like with this that they would. . .if we could come up with an idea to them as to how they could maximize values for stockholders that they would listen to us. I was wrong. We came up with an idea, and they wouldn’t even give us the time of day.

But you remember when that first started and we took the position in Gulf, that the first. . .I think the first article I read—and I was prepared for it—that it was “gunslinger”. . .that Pickens is a “gunslinger.” Well, whatever that means for sure I don’t know. But then “raider” was immediately after that. And then it was “hit-and-run artist.” Well, we knew very well what hit-and-run meant because. . .that we would go in and force the management to pay us a higher price and that we would run. So, we said well we’ll get that straightened out right quick. And I spoke before about 300-400 investment and portfolio managers and analysts in New York, and we told them at that time we were sticking with all the Gulf stockholders. We were going to maximize values for everybody. And so that sort of took that away for anybody that listened. And as the deal progressed and we got away from “gunslinger,” “raider” and “hit-and-run”—I haven’t seen that. . .still see “raider” every once in a while.

But we did get around to the part that these people are trying to maximize values for all the stockholders, and we were of course the largest stockholder of Gulf Oil. . .which that, to me, that is the free enterprise system working, too. You invest your money, and then you make things happen.

It was interesting along the way there that Jim Lee in an interview on CNN with Lou Dobbs made the statement... said Lou kind of led him into it. . .said “Where have you been this week?” And he said, “I’ve been out talking to my large stockholders getting them to vote with us on the December 2 vote.” He said, “Oh, if you’ve been talking to your large stockholders, you must have talked to Pickens this week.” He said, “No, we don’t consider Boone and his group to be stockholders because they borrowed the money to buy the stock.” Well you know that just .... (Laughter) Everybody here in this room is thinking how many things have I borrowed money for and I thought I owned it? (Laughter)

But he then went to the December 2 stockholders meeting and would not. . .he was. . .they had it. . .you know this great elevated deal in the convention center there in Pittsburgh, and you know here we were all sitting down looking up, you know—and I think it was designed this way. And they had about 3,000 people in the room. And he said that we’re going to let Mr. Pickens speak today from the floor. And I felt comfortable with that because I was there with the rest of the stockholders. I didn’t particularly feel comfortable up on the podium with management of the company. But there he went through it again—that we do not consider Pickens to be a stockholder because he borrowed the money to buy the stock.

Later we got all this straightened out. They decided we were a stockholder. (Laughter) And the last conversation I had with Jim was about in the middle of February and I said. . .he said his lawyers had advised him to stop talking to me. And I said, “Is that what we’re going to do?” He said, “No. I’ll take your calls anytime they’re made.” So he did decide we were a stockholder.

But where we convinced everybody that we were going to go right down the line with what we said we’d do. . .on February 17 Gulf’s management offered us an opportunity to get out of our position for $70 a share, which would have made a substantial profit for us. And we turned them down.

And it was an interesting. . .I had come back in to Miami, Florida. I’d been to Ocean Reed purely on business. We were working out some of the details of the Penn Central deal, which some of you may or may not have remembered, but that’s where some financing came into us about that time. And I had been working there at Ocean Reed and came back in late that night. My wife had been sitting there waiting on me for five hours. I came back in and she said, “You’ve got an urgent call that you better take.” And I said, “What is it?” She said, “Well, Gulf’s made an offer to us for our position in the deal.” And she said, “They’re waiting in New York to hear from you.” Our people were—not the Gulf people. It had come back through the investment bankers. . .from Gulf’s investment bankers to our investment bankers to the lawyers to me.

So I called back and got our people on the phone. They said that the offer is $70 a share to take us out. And I said, “What are they going to do for the rest of the stockholders?” And they said, “Well, they’ve got a real interesting deal for them. They’re going to buy 20 million shares for $72 from the other stockholders.” And I said, “What will that blend on the remaining. . .the residual company after the purchase of our block and the stockholders’ block?” And they said, “The blended price would be about $55 for the other stockholders.” And I said, “Easy call for us, isn’t it.” And they said, “You’re saying no.” I said, “That’s right. No is what it is.”

And so I got on the plane and Bea said, “You didn’t take very long.” And she had gone on out to the plane. She said, “It didn’t take very long.” And I said, “No it didn’t. When they told me what the blended price was for the rest of the stockholders, it didn’t take but a second.”

So we. . .when that word came back. . .of course, Gulf said that we didn’t offer them $70. They did offer $70; and that’s a fact. They did. . .it went back through the investment bankers to talk to us. But I mean. . .it was a firm offer.

But to show you what their communications were. On Tuesday. . .that was on Friday night. It was reconfirmed the following morning at 9 o’clock by our people. They said, “You’re sure of this?” I said, “That’s it. No deal.” And the. . .and so Tuesday, Lee with Gulf still had not gotten word that we had turned them down on $70.

So you can kind of fit that together with why probably we won. It’s because that one incident would pretty well typify the situation from the standpoint that their communications were horrible. I mean, they were just almost non-existent at times. I don’t know why they didn’t immediately get in touch with him that night or the following morning. But it was Tuesday afternoon that he found out that we were turning down the $70 offer.

But it’s interesting to. . .you know, when you look at it, you know, we could have. . .we were honestly trying to maximize values for stockholders, and I think we did accomplish what we set out to do.

To give just a brief analysis of what has taken place at this point and what this means to all those involved. . .and, of course, I always come from the stockholders’ standpoint because I think that, to me, is the free enterprise system working. That the stockholders put up their money, they took their chance, they’re entitled to a decent play and a return if it’s there for them. They’re the cornerstone of the free enterprise system. If you start taking things away from stockholders, it’s going to be a very, very tough deal as far as raising money for public-owned companies and whatever, as far as the confidence is concerned, it’s going to be devastating.

But Socal here with an $80 bid. . .we had no choice at that point. We could have screamed, you know, anti-trust problems and tried to stay in and take control of Gulf. Our offer was $65 and we only had a partial offer. I had the FTC—which I testified before last week—they said, “Why didn’t you offer more?” I said, “Because we didn’t have any more money.” (Laughter) They said, “Why didn’t you offer more stocks?” I said, “Same reason. We went with all we had in the deal.” But I said remember one thing, this company was appraised at $114. The all-time high was reached in 1981 at $53. And we started buying at $36. Now this company was never going to go back to $53. The company was in liquidation. The appraised value was very high, the market value was at a fraction of the appraised value, and the stockholders were never going to see a $53 price again. Now here we were. . .at least we had it up into the $60s. So we had done a real good job, I believe, for the Gulf stockholders. Now Socal did a better job; they offered $80, which is fine.

But that $80 offer, what it means is. . .and I had a Congressman friend of mine say, “Boone, how do I explain why I would want this to go ahead and go through the FTC, that it would be a deal?” I said I’ve got a good answer I think. That it took $13.2 billion—Socal borrowed $13.2 billion. And don’t be concerned about $13.2 billion messing up any credit markets because the bank credit has. . .that the chief economist for CitiBank testified before the Judiciary Committee two weeks ago that there is 4 trillion dollars in the credit market. And so 13 billion dollars is insignificant. SEC has also testified that; so has the Fed. . .Paul Volcker has also said the same thing. It’s insignificant as far as credit.

But the $13.2 billion. . .a big part of it will be borrowed in the Eurodollar market. But that money, that $13.2 billion goes directly into the hands of about 4 or 5 hundred thousand stockholders. I mean it’s direct infusion into the U.S. economy. About half of it is profit; about 6 ½ billion of it is profit. And there’s going to be about $2 billion plus dollars in taxes. And I said if I’m here as a Congressman getting ready to look at this situation and you’re telling me that there’s going to be $2 billion in taxes dropped in like that for us, there’s $6.5 billion dollars in profit and $13.2 billion goes back to this economy, I said, I can come around pretty quick.

Let’s let the present laws that exist and the Federal Trade Commission. . .let those people worry about any anti-trust implications in this whole thing. That isn’t something for Congress. If our laws are inadequate, there should be something changed. But to put a six-month moratorium in here, why markets can change, prices for oil can change, interest rates can change. . .those 4 or 5 hundred thousand stockholders that are sitting there waiting to pick up that $80 offer that they analyzed well, believed they were going to get it sometime out in the future, now being told by the Congress of the United States saying no, we’re not going to let you have it right now. That is unfair. And my point to Senator Bennett Johnston who proposed that legislation—we had about an hour and ten minute conversation about this subject three weeks ago—I said, “Bennett, if you’re going to start playing this game, you better put about the same thing you put on a cigarette pack. Beware.” And this goes on the legend of a stock certificate. “Beware because you could have legislation passed against you that could be financially disasterous. It could kill you financially.” I said, “Start putting that legend on the stock certificates, because you’re going to throw a blanket over this whole thing that is going to be devastating to the capital market of the United States to start wondering whether these kind of things could be stopped by Congress.”

The legislation was sidetracked and it was. . .if we, when we went to Washington, had started talking to the Senators. . . .I’m getting a little confused on dates, but I think it was last Wednesday when the vote came up to table this and kill this legislation. But when we went to Washington two weeks before that and realized how serious it was and if they had voted that day, they would have put a six-month moratorium on these deals. As the Senate started to understand that here you did have $13 billion infusion into the economy and $2 billion worth of taxes to pick up. . .and there was the FTC that looked at these situations closely from an anti-trust. . . .

And let me give you some comparisons there. The combination of the number 5 oil company in the United States, Gulf, and number 6, Socal, actually only was 10.1 percent of the refining and marketing capacity in the United States. And Socal had already said on any overlapping situation that just, you know, we’ll divest wherever you want us to. They’d already disarmed the FTC on that. But more important to me is how much of the production in the United States was in the hands of these two companies. It was 5.8% of the domestic production—just a fraction of the overall production of the United States.

So it was ...we didn’t have anti-trust problems here. It was. . .I mean, and that is exactly what is going to happen. But here we had a. . .we saw legislation that showed up that it was against. . .it was pointed directly at one industry, which is not unusual in Washington to have that happen. But it was directed right at the oil and gas industry, it was directed right at shareholders and the free enterprise system, as far as I was concerned.

And I was able to get through to some of those people up there that in corporate America today there are 42 million shareholders in public-owned companies. That’s one out of every six people in the United States own stock in some public-owned company. If you assume that each one of those people has a spouse, now we have ⅓ of the people—80 million—in the United States that have some connection to a public-owned company. And that is some huge constituency. And I’ll tell you, if there’s one thing that will draw people together, it’s money, and it’s their money. (Laughter)

And I can tell you, I started to get the attention of some Senators up there when they started thinking about making 80 million people mad. It’s. . .of course, you’ll never get the 80 million, but there’s a big percentage of them that would be linked together because of money and because they do believe in the free enterprise system.

The FTC. . .my feeling was there that, you know, the laws are quite adequate to take care of the situation. And they will be taken care of from that standpoint.

We beat it on the floor there 57 to 39, which had they voted two weeks before, Bennett Johnston would have won that.

But Bennett Johnston here, again, was a real. You know, it was confusing at best. I found most of you here in the room have much more experience than I do in dealing with the Senate. But here, you know, you find that they leave certain special areas to individuals that they feel are specialists. If a Senator knows about the oil and gas industry, others will defer to him and say, well, you know he’s from a producing state and he’s a very bright guy and he knows, and so we should listen. Well here you had a Louisiana Senator that had stepped in here and said that this thing should all be stopped. Well, you know, he immediately has other Senators that are going to follow his lead. It was interesting here that          did not go along with this and voted against his fellow Senator from Louisiana. Lloyd Bentsen from Texas really carried the banner for the industry in his comments from the floor, as did John Tower. And it was interesting that Bennett. . .who was Bennett with? He finally in the. . .there were two bills floating around here. He finally co-authored with Howard Metzenbaum. Now that’s got to be a tip-off. (Laughter)

The kind of problems that Bennett caused me in this whole affair. . .that I made a speech Friday in New Orleans to LAIPRO, which is a Louisiana Independent Producers and Royalty Owners Association, and they had voted. . .they also had sent a deal to him saying that, you know, you’re off base and kill it, Bennett. Same thing from the Louisiana state Senate. . .unanimously came up with a resolution and told him not to do it. So he was getting all kinds of pressures from home.

And so, on Thursday morning, well Bennett, after this was over with and he had lost on Wednesday, he commented to the New York Times and said, well, it’s now Pickens’. . .the rumors are that he’s going to make a move to Enstar. I never even looked at an annual report on Enstar. I mean, that’s how flagrant a remark, you know, and flammatory a remark can be to a market on something like that.

So I made the comment in New Orleans on Friday, I said, well if Bennett is going to start speculating on my business, I feel like I can speculate on his business. And so, my speculation on his business was that he was very definitely trying to get on anybody’s ticket in 1984. And I say anybody’s, I think whoever came by that if he had a profile high enough that he believed he could get on there, that’s what he was after. There was no other way that Bennett Johnston would co-author a bill with Howard Metzenbaum. Now there’s no other way. . .that he’s trying to signal something to us that he’s leaving the industry and he’s going on national politics is what he’s after. And he’s got a lot of problems in Louisiana because he’s done this. It looks like now that Bennett and I are going to debate this before the Washington Press Club on the 10th of April. And so, that will be an interesting debate there. (Laughter)

But where is the industry going? I see big changes ahead, and I think it’s good. I like what I see. I have people tell me. . .and they’ll hit me with a remark that well, if you combine these companies and Socal picks up $13 billion debt, what does that do as far as exploration is concerned for America? My feeling is that the independents drill over 80% of the wells in the United States anyway. And if the majors want to load up with debt, I think it’s super. (Laughter)

We’re going to get them just like where we have been right here in this room, a bunch of us. And we’ve had to play from behind the goal line a lot. These people get their field position inside the 50 all the time. And I want to see these guys see how they play from a bad field position. Let them get $13 billion worth of debt. If they don’t want to drill the wells, the independents will drill them for them. We’ll get more prospects out of them; we’ll get more farmouts. You know, we do a better job than they do. Our finding costs are cheaper than theirs are. So I don’t see any way that America is going to get cheated by Socal borrowing $13 billion. I don’t know of anything I’d rather have happen unless they borrowed $26 billion. (Laughter)

I like it. I think the changes are going to be good for the industry. I think they are going to be good for the country. I think the efficiencies will come in at the combination of these companies. And I found it to be interesting that, you know, most of the majors are run by engineers. And I don’t want to upset any engineers sitting here today, but engineers are suspicious of exploration[Handwritten addition: ists]. I mean, that’s a fact. Isn’t that right, Jim? (Laughter) They are suspicious.

But here, I thought it was. . .I loved the statement that old George Keller, CEO for Socal, made a couple of weeks ago. And they got him to shut up on it, too. He only made it once. It was in The Wall Street Journal. But it was. . .I can paraphrase it. I don’t know the quote exactly. The question came. . .Bennett Johnston. . .from the reporter at the Journal said, Bennett Johnston says that Socal borrowed $13 billion. . .take away exploration funds and. . .you know, why don’t you borrow that $13 billion and go out and drill wells with it. And old. . .I can just see Keller. I know him well. You know, I can just see him saying, “What!” And this is what he said, but I can just see the expression on his face. He says, “What! Borrow $13 billion and put it in a crapshoot!” (Laughter) That’s what he said. But the next time he said it before the Judiciary Committee hearings. . .and I was testifying there that day. He said, “Why wouldn’t you borrow $13 billion and put it in exploration?” He said, “There isn’t any banker that will loan $13 billion and let you wildcat with it.” And I wanted to say, George, tell them about the crapshoot. (Laughter)

But I do see that there are going to be changes in this industry. And I think they are going to be healthy. I think they’re going to be good for the independents. And I like what I see. I think you’re going to see more; they’re going to want to buddy up.

You know, I couldn’t believe Keller’s remark to Fortune magazine a couple of weeks ago, where he said, “I. . .Jimmy Lee called for help,” and he said that “we’re helping him. He’s a member of the fraternity.” And I thought, well I don’t believe I would have said that, George. (Laughter) You know, that’s what people suspicion all the time. You know, it’s a big company fraternity. And it is to a certain degree.

But, I see a lot of changes, and I think they’ll be good. I think it’s the free enterprise system working at its best. And I want Congress to just take a hands off. . .go ahead and pick up all the tax revenues out of the deal that they’re going to get—and there’s going to be a bunch of them if they’ll just let it go because there are going to be big profits for stockholders here. And I think they should be allowed to get it.

But remember one thing, and I’ll conclude my remarks here and take questions. But one thing, remember, that in many cases these companies are in liquidation, and that is a tough way for stockholders to go out. . .to just sit there and see the company liquidated year after year and reserves not replaced. So there is a place in here doing the right thing for people. And I think that with a little pressure on some of these managements that we’ll find out that they’ll come around and do the right things.

Thank you very much