Raymond Plank
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Founders · #427 How Raymond Plank Built a $50 Billion Oil Company
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Why Would Oil Majors Sell Small Wells to Apache?
David Senra says major integrated oil companies would sell smaller wells to Apache while they sought cost reduction, cash to redeploy, and larger reserves. Raymond Plank's counter-position was to buy wells the majors had not invested in, because their incentive was power-law discoveries, and to do a better job on the little wells than the majors cared to do.
The new incarnation required a substantially greater level of critical mass to operate as an oil company on internally generated cash flow from wells owned and operated on Apache's own account. The decision shifted the primary focus from drilling to the acquisition of assets with upside through acquire and exploit tactics. The infrastru
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How Did New Drilling Methods Revive Apache's Old Wells?
David Senra says Apache's old oil wells paid off decades later because people outside the company invented drilling techniques that made land Raymond Plank bought start producing again. Plank was not emotionally attached to earlier decisions. When oil opportunities improved, Plank sold virtually everything else and returned Apache to a focused energy company, and almost four decades later Plank was still reaping the benefits.
In 2011 Plank got a report on wells on land bought for Apache between 1970 and 1977. Apache had thought the company had already taken everything the land could give. New drilling methods, invented outside Apache, made wells held for 40 years start yielding great result
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How Much Did an Apache Oil Bet Really Cost?
David Senra says the book's example of a $200,000 check for an Apache drilling program cost the investor about $56,000 out of pocket. The rich investor deducted 80 percent immediately, or $160,000. Investors sat in brackets above 90 percent, so 90 percent of $160,000 equaled $144,000, and the IRS effectively paid much of the cost through reduced taxes.
Apache's first and most important product was a tax-efficient investment vehicle for very rich people. Wealthy investors wanted legal ways to reduce taxes, and oil and gas carried unusually generous benefits because the government wanted domestic energy production. Apache packaged drilling so investors could profit if oil was found and deduct
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How Did Apache Corporation Begin in 1954?
David Senra says Raymond Plank founded Apache Corporation in 1954 with $250,000 after Minneapolis oil investors told him he must take over and manage their assets. The firm knew nothing about finding oil or completing and producing wells, did not feel qualified, and proceeded nonetheless.
Little drilling in the United States during World War I and World War II had left American oil resources rapidly depleted. After the wars, Washington incentivized a domestic search through tax incentives and raised graduated income taxes to pay down immense war debts. The top tax rate exceeded 90% of gross income. High tax rates plus drilling and production tax incentives pushed heavily taxed people to inv
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Why Did World War II Make Risk Feel Small to Raymond Plank?
David Senra says Raymond Plank's World War II service, as a young man in his early 20s, made the business risks he took later seem small by comparison. Part of Plank's almost overactive zest for life came from seeing friends die and not return from combat.
Plank was a fighter pilot when World War II began. At age 22 he flew a four engine bomber, responsible for the well-being of a crew of 10, helping kill the Japanese who sought to kill them. Of the 40 missions he flew, the squadron was shot up on 19. Courage is not the absence of fear; it only counts if you are actually afraid.
Biographies of Rockefeller show the same pattern Senra sees in Plank: low-key, very rarely showing emotion, and
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Why Is Raymond Plank's Memoir Called a Small Difference?
David Senra reads the introduction of Raymond Plank's memoir A Small Difference. Plank writes that at about age 10, on a walk, his father dropped his hand, put an arm around his shoulder, and said he had found it very useful to try to make a very small difference on behalf of others. They never discussed it again. Looking back from his 90th year, Plank says the line was still fresh nearly 80 years later.
The second cornerstone was a postcard his mother wrote a few days before she died at age 47, when he was 15. She wrote that the 15 years they shared had been glorious, that he was fine and unselfish, and that her pride would go on if he kept his head up and his courage and faith high. She d