The Louisiana Land and Exploration Company (LL&E) is one of the largest independent oil and

gas exploration companies in the United States. Headquartered in New Orleans, it operates a
crude oil refinery near Mobile, Alabama, and conducts exploration and production operations in
the United States and selected foreign countries. Of the company's 225 million barrels of oil
equivalent reserves, nearly 60 percent are garnered from domestic sources. Foreign reserves are
located in the U.K. and Dutch sectors of the North Sea, Canada, and Columbia.
LL&E traces its roots to the 19th century, when midwestern businessman Edward Wisner moved
to Louisiana for his health. Wisner was struck by swampy southern Louisiana's resemblance to
the low-lying Netherlands, where industrious farmers had reclaimed millions of acres for
farming. Envisioning farming on a grand scale, Wisner bought hundreds of thousands of acres,
built levees, and drained the land.
Wisner's plans, however, were thwarted by southern Louisiana's severe weather. A 1915
hurricane destroyed many of the levees that Wisner had constructed. The venture's finances
faltered and in time there were foreclosures. Much of the land was eventually taken over by a
group of midwesterners led by Henry Timken, who owned an Ohio ball bearing company.
Timken hoped to lease the land to fur trappers.
In 1925 speculator Edward Simms approached Timken with an idea for a company that would
explore for oil in the almost 600,000 coastal acres Timken then controlled. Timken agreed and in
1926 exchanged his acres for shares in the Border Research Corporation.
It soon became apparent that the land owned by Louisiana Land and Exploration, as the company
was renamed in 1927, was rich in petroleum resources. In 1928 LL&E signed a contract with
Texas Co. (now Texaco) in which that company agreed to lease all of LL&E's acreage around
ten productive salt domes. (A salt dome is a raised central area of salt or rock, around which beds
of sedimentary rock dip in all directions. Oil and gas often become trapped in the pockets that
form around these structures.) In the contract, which was very generous for its time, Texaco
agreed to pay LL&E a 25-percent royalty on production and 8 1/3 percent of its net profits on a
dome-by-dome basis. The contract would remain in effect for as long as Texaco continued to
drill on the acreage. "It was a very unusual contract for 1928," LL&E president Ford Graham
told Dun's Review in 1965. "The normal royalty was one-eighth (12 1/2 percent). And profit
sharing on top of the royalty was unheard of."
In 1930 Texaco also agreed to pay LL&E's $1.8 million funded indebtedness. In exchange for
this, Texaco would retain one-half of the royalties and profits payable to LL&E up to the amount
of $800,000. In 1935, after Texaco had been fully reimbursed, LL&E paid its first dividends.
On November 7, 1938, LL&E and Texaco amended their contract. Texaco released the fee lands
belonging to the company not located on or near the domes or structures which were then being
operated by Texaco. This released acreage amounted to approximately 557,000 acres.
Through the 1930s and 1940s, LL&E collected royalties on oil and minerals extracted from the
land it owned and controlled. In addition to Texaco, which was still its major leaseholder, LL&E
secured royalty agreements with Phillips Petroleum Co., Stanolind Oil & Gas Co., Alder Oil Co.,
and Plymouth Oil Co., among others. In February 1943, President E. B. Tracy signed a contract
with Duval Texas Sulfur Co. that gave that company sulfur exploration, development, and
production rights on LL&E's land and leased interests in Louisiana's Terebonne Parish.
During these years, LL&E did virtually no operating of its oil projects. The company had few
employees and operators shouldered the major expenses of exploration and development. As a
result, LL&E enjoyed low expenses and high profits. In 1943, for instance, LL&E employed
only 24 people, yet earned $1.8 million on sales of $3.4 million.
In the 1950s, CEO Robert M. Youngs began to guide LL&E into other exploration, both on its
own lands and on land it leased in other U.S. areas of production. As on previous occasions,
LL&E's involvement was a financial one. It held working interests but did not actively manage
projects.
As LL&E operations grew, both sales and revenues increased. In 1955 it reported $13.4 million
in profits on sales of $22.4 million. In 1960 Youngs signed a second contract with Texaco that
subjected 275,625 additional acres to six years of exploration and development. Under the
agreement, LL&E retained a 25 percent working interest and a 20 percent royalty in Texaco's
share of production. "We pay 25 percent of the cost," Ford Graham enthusiastically told Dun's
Review "and get 40 percent of the income. Texaco pays 75 percent and gets 60 percent. And they
paid us a $4 million bonus on the lease!"
The early 1960s proved very successful for LL&E. In 1964 the company reported profits of
$32.1 million on sales of $64.1 million. In addition to the Texaco royalties, which were still
significant (of 25 Lake Barre Field wells Texaco completed in 1964, 21 produced oil, two
produced gas and only two were dry), LL&E had signed royalty agreements with Union Oil of
California, Signal Oil, Amarada Hess, and Humble Oil and Refining. Moreover, because of
varied corporate exploration philosophies and changes in drilling and seismic forecasting
techniques, LL&E was constantly leasing and re-leasing the same acreage to different operators.
Outside of Louisiana, Youngs acquired mineral rights and royalty interests on 152,870 acres in
Texas, New Mexico, North Dakota, South Dakota, Montana, Colorado, Florida, and Mississippi.
By 1964, non-royalty, working-interest or joint-venture income had increased to 45 percent of
LL&E's total sales.
As the company expanded into working interests, it hired geologists, geophysicists, and
engineers. It continued, however, with its policy of contracting other firms to perform seismic
surveys and other exploration and development tasks. In 1965 LL&E had only 145 employees.
Graham worked hard to keep expenses down. "Our organization," he told Dun's "is the non-rigid,
non-army type. For example, we don't hesitate to use consultants. When we have a project we'll
go to Houston, rent a computer and run it through. And when we're finished we don't own the
computer or have the people on our permanent payroll."
But while Graham focused on controlling costs, he, like other CEOs of that era, also sought
profits in new businesses. In 1966 he acquired Jacintoport Corporation, an industrial real estate
firm with Gulf Coast holdings such as the Houston Ship Channel. Forbes later criticized the
Jacintoport purchase, maintaining that LL&E had gotten into industrial real estate, "just at the
time when the play was going out of it along the Gulf Coast."
Continuing to diversify, in 1968 Graham obtained the rights to participate in the resort
development of approximately 50,000 acres on the western half of Molokai Island, Hawaii--an
island previously best known for its leper colony.
LL&E continued to do quite well in the late 1960s and early 1970s, reporting income of $51.9
million on 1970 sales of $114 million. In the early 1970s, however, its Louisiana reserves began
their natural decline. To make up for this, LL&E participated in additional working interest wells
and in 1970 discovered a major reserve estimated at 720 million barrels of oil in the Jay Field in
Santa Rosa, Florida. In 1971 revenues from working interests exceeded those from royalty
interests for the first time.
The company continued to look for new sources of oil and in October 1972 newly named CEO
John G. Phillips announced a $75 million offering to finance a new subsidiary, Louisiana Land
Offshore Exploration Co. (Lloxy), that would explore for oil and gas in the Gulf of Mexico.
Forbes criticized the offer, charging that the company had waited too long to get into
explorations and would be left with expensive deeper water wells. This criticism was borne out
in December of that year when Lloxy paid $60 million for Gulf leases covering land under 300
feet of water.
As LL&E expanded its exploration efforts (by 1974 it was exploring in southern Louisiana, the
Rocky Mountain area, a geological stratum from northern Louisiana to Florida, and off the coasts
of Louisiana and Texas) it began to act as operator in an increasing number of its working
interest efforts. In 1975 the company opened a small refinery in Mobile, Alabama, to process
30,000 barrels a day of Jay Field crude.
Phillips, meanwhile, continued to diversify. In 1974 Jacinport reported $2 million in real estate
sales. In 1975 the Kalua Koi Corporation, LL&E's 50-percent-owned Hawaiian operation, began
construction on the first phase of a 298-unit hotel condominium complex. In addition, in
December 1976 LL&E acquired the Warrior River Coal Company, owners of a small surface
mine in Tuscaloosa, Alabama. The following June a wholly owned subsidiary of LL&E, the Sun
Fire Coal Company, began to develop an underground mine near Hazard, Kentucky.
Seeking new profit sources and seeing links between fossil fuels and mineral extraction, Phillips
laid out $51 million for the Copper Range Company in May 1977. The Copper Range Company
owned a copper mine in White Pines, Michigan; refined and fabricated copper bars, strips, plates,
and sheets; owned 185 thousand acres of mixed hardwood timber; enjoyed extensive mineral
rights in upper Michigan; and owned a one-half interest in a Nevada gold mine.
The Copper Range acquisition did not please the financial community. Forbes called Copper
Range "a company so bad that some analysts wondered whether it was acquired to make
Louisiana Land unattractive as a takeover candidate." As if to bear out this description, LL&E's
mining operation lost $7.8 million in 1977 and $6.6 million in 1978.
Phillips, however, remained committed to Copper Range. Construction began on a new catalytic
reformer that would provide more highly valued refined products. Due to higher prices for
refined copper, the mining operation even turned a profit of $9.7 million in 1979.
These diversification adventures were possible in part because of high profits in the oil industry.
Between 1978 and 1980 LL&E's sales jumped from $549.4 million to $1.075 billion while
earnings increased from $94.8 million to $180.2 million, despite $64 million in 1980 windfall
profits taxes.
But while business was very good in the late 1970s there were doubts about LL&E's future. With
no more than 4.4 years of proven reserves on hand in 1980, Phillips needed to find new reserves
at a reasonable cost if he was to insure the company's continued profitability. To do this, he
committed major amounts of capital to new exploration initiatives. In 1980 he formed CLAM
Petroleum, a 50 percent owned unconsolidated affiliate through which LL&E would invest $250
million in the U.K. North Sea's South Brae Field. In 1981 he budgeted a still-record $653 million
for exploration and development. This figure included $181 million for 215 wells; $64 million
for leases in Wyoming, the Gulf of Mexico, Australia, Indonesia, Columbia, and the North Sea;
and $286 million for construction at Brae Field, platforms in the Gulf of Mexico, and a tertiary
recovery project at Jay Field.
In the early 1980s, industry economics changed LL&E's fortunes. Deteriorating economic
conditions, windfall profits taxes, high dry hole costs, narrower profit margins, and declining
demand all pressured earnings. In 1981 earnings fell to $145.2 million despite revenues of almost
$1,277.5 million. To make matters worse, copper revenues declined and precious metals margins
shrank.
In 1982 matters continued to deteriorate as a recession caused a downturn in prices for liquids,
lower demand and prices for copper, a halving of refinery margins, and reduced demand for
natural gas. Responding to these problems, Phillips curtailed and then suspended copper mining,
reduced staff, eliminated high-risk exploration ventures, cut back on capital expenditures, and in
November reduced the cash dividend. At year's end, he was able to salvage earnings of $76.3
million despite mining operations that sustained a pretax loss of $38 million.
The company's troubles climaxed the following year as investor Delo Caspary mounted a proxy
fight to remove Phillips and the rest of management. Supported by the Hunt family, which
boasted a 12.3 percent block of LL&E stock, Caspary attacked LL&E's record since the mid-
1970s, pointing to declining earnings, reduced dividends, falling reserves, and the copper
acquisition.
Caspary's charges had some legitimacy. Business Week called Louisiana Land's record "dismal"
and noted that despite spending $1.4 billion over the previous four years Phillips had failed to
increase oil and gas reserves. The magazine went on to comment that LL&E's finding and
developing costs were among the industry's highest and noted that the company had closed its
Michigan copper mine after completing work on a $78 million dollar copper smelter.
Management trumped Caspary, however, when it pledged to spin off to stockholders a tax-
sheltered royalty trust holding oil and gas properties that generated $30 million a year.
After winning the proxy fight in 1983, Phillips sold LL&E's coal properties and bought back 71
million shares for $212.8 million. That year the company also saw initial returns from both the
tertiary recovery project at Jay Field and the "A" platform of the Brae Field in the North Sea. By
year's end, Phillips could boast of $94 million in profits on sales of $1.25 billion.
In 1984 Phillips was replaced by E. L. Williamson, who worked to sustain profit margins and
increase reserves. In 1986 Williamson rid LL&E of the Copper Range Company--taking a $91
million charge in the process. The same year he paid $486 million for Inexco Oil Co., an oil
company with reserves that included 9.9 million barrels of liquids and 392.7 million cubic feet of
domestic natural gas reserves. These moves strengthened LL&E's overall position, but plunging
oil prices and the Copper Range charge took their toll. LL&E reported 1986 losses of $20.6
million.
In 1987 the company began to acquire newly opened low cost leases in the shallow waters of the
Gulf of Mexico. Given narrow margins, however, LL&E's major interest was in purchasing
additional interests in proven properties.
In 1988 crude prices fell by more than $3 a barrel and newly named CEO and chairman H.
Leyton Steward was forced to take an $81.8 million restructuring charge and a $33.3 million
loss. Steward announced that LL&E would sell nonstrategic oil and gas properties and use the
proceeds to repay long-term debt and repurchase up to 10 percent of outstanding stock.
Earnings recovered in 1989 as oil prices rose while replacement costs remained low. Steward
used excess cash flow--including $198 million from asset sales--to repurchase nearly 2.6 million
shares and reduce LL&E's total debt by one-third. That year also marked Steward's conclusion of
a property exchange that substantially increased LL&E's interest in the Madden Field in
Wyoming.
As the largest owner of environmentally sensitive wetlands in the continental United States,
LL&E had long been careful to protect its investment. It insisted that drillers bury pipe so as to
not disrupt grasses or aquatic life, and it constructed pumps and water control structures to
prevent erosion or saltwater intrusion. In 1989 the Department of Interior recognized this effort
and awarded LL&E its Conservation Award for Respecting the Environment.
LL&E enjoyed a good exploration year in 1990. It replaced 203 percent of expended reserves,
adding 55 million equivalent barrels of oil and natural gas, 46 percent of which came from the
East Brae Field. Costs were low at $3.23 per barrel and by year's end, LL&E's reserve life index
stood at 8.4 years, nearly double that of 1980.
LL&E's company earnings, $54.9 million in 1990, fell to $20.9 million in 1991 as falling oil and
natural gas prices combined to make the year a difficult one. Nevertheless, the company
budgeted $200 million for capital and exploration and continued to drill in the Gulf of Mexico,
Madden Field in Wyoming, the gas-rich Anadarko Basin of Western Oklahoma, the North Sea,
southeastern Alberta, and Columbia, where it was garnering positive results from a drilling
program begun in 1978. It also sought to expand riskier but potentially more lucrative foreign
exploration. To this end, in 1991 LL&E acquired two interests in Australia and applied for a
concession in Papua New Guinea.
Founded as the Border Research company in 1926 and renamed Louisiana Land and Exploration
a year later, LL&E, for its first twenty years, essentially collected royalties from fossil fuels
extracted from nearly 600,000 acres it controlled in southern Louisiana. During the 1950s, CEO
Robert M. Youngs began investing in working interest wells. During the 1960s, CEO Fred
Graham began a process of diversification that would eventually include a Hawaiian resort, a
coastal industrial real estate operation, and coal, gold, and copper mines. During the early 1980s,
lackluster exploration results and fluctuating prices destabilized the company's finances and
forced it to sell its non-oil and gas efforts and concentrate on finding new low-cost reserves.
Principal Subsidiaries
CL&E Corp.; Inexco Oil Co.; Wilson Bros. Drilling Co.; Molokai California Ltd.; LLOXY
Holdings, Inc.; White Pine Leasing, Inc.; LL&E Properties, Inc.; Westport Utilities Systems Co.,
Inc.; LL&E (Netherlands) Inc.; CLAM Petroleum Co.; MaraLou Netherlands Partnership (50%).
Further Reading
Jordan Wankoff



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