GTR Oil Series, Part 16
By CHARLES CANTRELL
Associate Editor
SURVIVOR: Many banks failed in the 1980s during the economic collapse in the oil sector. One of the most famous was the Penn Square Bank failure in Oklahoma City, which was a forerunner of things to come for many other financial institutions. Tulsa’s Bank of Oklahoma, located in Oklahoma’s tallest building, shown above facing Boston Avenue, experienced great financial difficulty and was later helped by the federal government. Today it is one of the strongest banks in the nation operating under the BOK Financial Corporation holding company, operating six full-service banks in six different states across the U.S. Bank locations include Oklahoma, Texas, New Mexico, Arkansas, Arizona and Colorado. The Corporation’s flagship bank is the Bank of Oklahoma, with 75 branches serving customers throughout Oklahoma. BOK is also a strong corporate citizen and has naming rights to the BOK Center, the showcase of Vision 2025.
GTR Newspapers photo
Editor’s Note: This article is the 16th in a multi-part series about the past, present and future of the oil industry in greater Tulsa and throughout the region. The series began in Mid-June 2005 and has been published monthly since. The series is available on the GTR Web site at www.gtrnews.com.
Many terms have been used to describe Tulsa’s economy in the 1980s: economic collapse, regional recession, deflated bubble, the oil bust, just deserts and more. But no term truly captures the devastating effects a convergence of world events resulting in a rapid and prolonged collapse of oil prices visited on Tulsa and its energy-based economy. It was unprecedented, unforeseen and to this day not forgotten.
During the decade of the 1970s rising energy prices, runaway inflation and unemployment negatively impacted much of America. The result was the arrival of job seekers and entrepreneurs to Tulsa to tap into the prosperity of the oil boom. The switch began in the early 1980s as most of the country began enjoying prosperity brought on by suddenly cheap, plentiful oil, while cities like Tulsa, Dallas and Houston, with economies tied to stable oil prices, became economic wastelands.
Throughout the energy producing states very little escaped devaluation. Residential housing, commercial, retail and industrial property values slid dramatically. Banks, holding loan portfolios weighted with loans issued to finance bet-on-the-come oil wells, came under the scrutiny of state and federal bank inspectors. Some would not survive the resulting audits. This spawned years of bank failures and mergers. With the incentives of quick riches that brought many to the city gone, a great exodus of disillusioned opportunists began. Retail spending dropped off and forced many locally owned shops, small businesses and restaurants to close their doors and walk away. City coffers fed by sales taxes drained. Used car lots bulged with Mercedes and BMWs. Unemployment began a steady climb that would last until the 1990s. The party was over. It was time for Tulsa and the oil industry to suck it up and begin the healing.
Most would cite 1983 as the year when Tulsa would begin to experience a profound disillusionment regarding their energy-based economy. Talk of too many economic eggs in one basket began in earnest. The consensus among city leaders was to begin diversifying the economy. In fact, Tulsa’s economy was more diversified than was readily apparent. The aviation industry had long been a part of the city’s history. Companies like Rockwell International, American Airlines and McDonnell Douglas maintained a variety of manufacturing, maintenance and computer operations in this oil patch city. At that time, enough companies maintained data-processing operations here to enable Tulsa to claim more computer capability than Dallas. The area’s metal fabricating industry made it the country’s leading manufacturer of heat exchangers. In addition a variety of small start up manufacturing companies like Zebco, Lowrance Electronics, Murphy Controls and Hilti would continue on a growth path that would eventually aid in pulling the city out of the slump. A more diversified economic base was the prescription for the city’s ills, but what did energy companies do to survey such tumultuous times?
Big oil companies with vast financial resources would ride out the storm and watch for purchasing opportunities as the fallout began to take its toll. It was different for independent oil producers depending on their size and circumstance. Whatever the case, to survive the 1980s oil bust, one needed to be knowledgeable about the industry, a little clairvoyant and a whole lot resourceful. Early on, these facts eliminated those drawn into the oil frenzy looking for quick riches and who lacked the necessary understanding of the ins and outs of the oil market. Experience had taught old timers to avoid over extending financially during good times because they knew oil price history was testament to the adage, whatever goes up must come down. Those that heeded this rule survived through the downtime to emerge stronger and better as circumstances improved. Those too caught up in the exuberance of the oil bubble were blinded to the prospect that it would end, and the collapse was deeper than their pockets. Then there were the resourceful ones who believed that even in the oil industry, when one door closes another one opens.
Michael Cullinan is a third generation Oklahoma oilman who grew up learning the business from his father, uncle and grandfather. During much of the 1970s, like many others, he made a good living putting together lucrative well drilling deals and selling them to willing investors. Including one’s self in the deals was standard protocol for such ventures because it provided an added air of legitimacy to have the dealmaker vested in the deal. This resulted in Cullinan having ownership in successful oil and gas ventures. Before the downturn came and people began to loose all interest in investing in oil deals, he saw the proverbial writing on the wall prompting him to sell off his production and bank the proceeds to invest in a new venture.
The resulting shakeout of the downturn produced a large number of wells owned by independent producers that were considerably less to no longer profitable. In addition, large oil companies were dumping their inventory of marginal wells onto the market.
Cullinan knew many of these wells would never come back and would need to be capped. Much to his delight, he and his partner discovered there was profit to be made from stripper wells by pulling all the casing, tubing and rods from the hole and selling these items to used oil equipment brokers along with the above ground equipment consisting of pumping units, wellheads and other items. There was profit left even after the cost of cementing the wells in. This resourceful venture kept him afloat until things in the oil and gas patch began to improve.
This was one of many success stories of veteran oilmen surviving the awful 1980s. Stories of resourceful solutions and unavoidable heartache, bankruptcy and newfound wealth were all a part of Tulsa oil in the 1980s. Tulsans would learn a lot about themselves and their city during this time and the lessons would guide them into the 1990s as the city’s economy began to grown in many different directions because, as always, the times they were a changing. (Next issue: Independent Oilmen, It’s A Small Oil World After All.
Updated 10-12-2006
READER COMMENTS
About Post Author
