Richfield & Sinclair

Tom B. Slick was a frenzied wildcatter from Pennsylvania whose boomtime oil financing became the wonder of the Southwest. He held lawyers, geologists and physicians in equal scorn and died of overwork in 1930, bequeathing his name to two oil fields, a withered oil town and Slick-Urschel Oil Co. In Oklahoma last fortnight the name Slick disappeared from the oil business through a merger of Slick-Urschel with the new Transwestern Oil of Oklahoma.

Last week in Los Angeles a bigger & better merger brought a smarter oilman than Tom Slick triumphantly into the news. After five years of patient maneuvering, poker-faced Harry Ford Sinclair had got what he wanted in California-- a major oil distributing system in that State. He got it by agreeing to share it with silver-bearded Chairman Henry Latham Doherty of Cities Service Co., just as he got his great holding company, Consolidated Oil Corp., on shares with the Rockefellers in 1932. Oilman Sinclair's triumph was the acquisition of working control of Richfield Oil Co. in a reorganization whose long-drawn negotiations began as soon as Richfield went into receivership in 1931.

In 1931 there was a report that Harry Sinclair had been elected board chairman of a West Texas Company called Rio Grande Oil, which had a branch in California. Rio Grande soon slid to the brink of receivership and Oilman Sinclair denied that he had anything to do with the company. Just ten months later, however, Harry Sinclair's new Consolidated Oil Corp. acquired control of Rio Grande with the help of Elisha Walker's Interstate Equities Corp. in a deal which has since aroused the curiosity of the Securities & Exchange Commission. Thus, at about the time Richfield was succumbing to overexpansion and mismanagement, Sinclair got his first sizeable foothold in the California market.

Meanwhile Richfield's 5,000 service stations and rich reserves had caught the eye of "Cities Service's Chairman Doherty, who bought large blocks of Richfield stock & bonds, offered to exchange Cities Service shares for Richfield shares, even paid Richfield's state gas tax when the foundering company's $85,000,000 book assets included practically no cash. Later, however, when the banking creditors' committee, bondholders' protective committee and unsecured creditors' committee were pondering a Doherty reorganization plan, Oilman Doherty looked into Richfield's books more closely, withdrew the plan and apparently washed his hands of the whole business.

About this time Harry Sinclair borrowed a Fokker from his new Rio Grande company, flew to California for an oilmen's dinner in his honor. "Gentlemen," said he, looking brawny President Kenneth Raleigh Kingsbury of Standard Oil of California in the eye, "I am in California and I am in to stay." Richfield's next half-dozen abortive reorganization plans came alternately from Standard Oil's Kingsbury and Consolidated's Sinclair. As soon as the prospects seemed good for selling out to one company the other company would raise the bid. Sinclair's last offer was $17,600,000 in stock, $10,000,000 cash in 1933. This was $5,000,000 more cash than Standard offered, but Richfield's bondholder and creditor committees decided that Harry Sinclair's securities were of uncertain market value, turned down his bid. It looked as if President Kingsbury had won. At Consolidated's annual stockholders' meeting in 1934, however, Harry Sinclair showed his ace. He announced that a deal was on with Henry L. Doherty to buy Richfield jointly. Same day, in California, Cities Service as one of Richfield's principal bondholders started an appeal in U. S. Circuit Court against the Richfield-Standard deal on the ground that the amount offered was grossly inadequate under California law.

Standard Oil of California nevertheless remained in the running until May 1935. when Oilman Sinclair cagily deprived Standard of its big incentive for buying Richfield by buying out Richfield's Eastern subsidiary. Richfield Oil Co. of New York. There followed a period in which the Doherty-Sinclair understanding awaited better days in the oil business and Richfield's able Receiver William Chester McDuffie continued to cut down annual losses in the face of excessive depreciation and depletion charges. Last spring, when Richfield was coming back to black ink for the first time since 1930, Harry Sinclair and Harry Doherty finally got together. Cities Service Co., which owned 25% of Richfield bonds, 14% of the bonds of Richfield's California subsidiary, Pan American Petroleum, and a majority of the Richfield preferred and common stocks, sold them all to Sinclair's Rio Grande Oil for a half interest in that company. In an immensely better tactical position to make use of the Richfield holdings than Doherty had been in 1931, Harry Sinclair proceeded to sponsor through Kuhn, Loeb & Co. a merger between Richfield and now prosperous Rio Grande.

Approved last September by two-thirds of the bondholders and creditors and last week by long-suffering Federal Judge William Parry James in Los Angeles District Court, the reorganization provides for a new company, Richfield Oil Corp., to which Rio Grande will contribute assets of between $15,000,000 and $20,000,000. Underwritten by Rio Grande, by Consolidated Oil and by Cities Service will be an issue of $10,000,000 in debentures, available to Richfield and Pan American bondholders and creditors through subscription certificates given them along with shares of stock in the new company. Underwritten by Kuhn, Loeb, by Consolidated Oil, by Cities Service, by Petroleum Corp. of America, by Atlas Corp. and by Blyth & Co. will be 550,000 shares of new common stock at $10 a share. The remainder of the total 1,000,000 shares is allotted to bondholders and creditors.

Last month when the motion of a Sinclair triumph was pervading the final hearings on the plan, Harry Sinclair made one of his stage gestures. In court rose his attorney, onetime Secretary of War Patrick Jay Hurley, to say that since some of the creditors appeared to think that Mr. Sinclair wanted to dominate the new company, Mr. Sinclair was willing to withdraw from rehabilitated Richfield's board of directors. Expostulating gently, the re-organization committee hastened to assure Mr. Hurley that it very much wanted Mr. Sinclair on the board. Other board members will be President F. R. Coates and Vice President W. Alton ("Pete") Jones of Cities Service, President H. R. Gallagher of Consolidated Oil, President Charles S. Jones of Rio Grande Oil, Richfield's longtime Receiver McDuffie and representatives of banking and creditor interests, including Cinemagnate Joseph Michael Schenck.

The final gesture was also Harry Sinclair's. When Judge James last week found it beyond his lawful power to grant Richfield's reorganization committee more than $160,000 of its $381,000 five-year expense account, Attorney Hurley rose again, announced that Rio Grande Oil would gladly put up the difference.

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