Clifford Culpepper
Oklahoma Oilman

Contents

Clifford Culpepper Charged With Oil Overpricing

By Becky Tallent
6 Nov 1981
The Daily Oklahoman
Copyright 1981, The Oklahoman

The U.S. Department of Energy has taken legal action through a proposed remedial order against Culpepper Oil Co. of Oklahoma City, charging the company overpriced its crude oil to its customers during the crude oil price freeze.

"We thought the company was overcharging during a time when the oil was under federal price controls," Wayne Tucker, DOE district manager of enforcement, said. "There was a very specific price they could charge and we feel that they violated that pricing law."

The alleged overpricing came to light when the federal agency was performing a routine audit of the company, Tucker explained. The DOE issued a notice of possible violation to Culpepper and the proposed remedial order is the first step of a legal process to regain the money.

"We are trying to take away the money they overcharged," he said. "It will be put into a special escrow fund and be returned to the people who were overcharged... provided that those people can prove they were overcharged and that they did not pass the overcharge on to their customers."

"At this time, we are involved in the administrative settlement of this case with the DOE, and therefore have no comment," John Stranger of Culpepper said.

Culpepper has 30 days to respond to the DOE's charge. Culpepper can ask for a hearing. Tucker said that it could take a year or longer to resolve the case then due to the length of the current docket.

If the company simply fails to reply to the proposed remedial order, the Enforcement Office petitions the Hearings and Appeals Office to make the order final, "and it has the same effect as if we won the hearing," he said.

The alleged overpricing came during the federal oil freeze when the price of a barrel of crude could not exceed $30 a barrel for new-new oil, $15 a barrel for new oil and $7 per barrel for old oil. The price freeze was lifted last February when President Reagan decontrolled all oil.

Clifford Culpepper's Firm Gives Up Control

By Becky Tallent
22 Jul 1982
The Daily Oklahoman
Copyright 1982, The Oklahoman

Dallas-based O.I.L. Energy Inc. will take over "administrative operation" of Oklahoma City-based Ports of Call Oil Co., along with 34 of its western Oklahoma oil and gas properties, officials said Wednesday.

O.I.L. official L.E. Johnson said his company has not purchased Ports of Call or any of its stock. "But O.I.L. will become the operator of record on the wells and the property manager," he said. This will be a permanent arrangement which will take effect on August 1, he added.

Carter Hines with Ports of Call denied reports that the company was filing bankruptcy. "There is just a lull in the industry that has caused us to pull in our reins a little," Hines explained.

"The repercussions of Penn Square Bank are affecting everyone. We are experiencing some cash flow problems. But we did not bank at Penn Square and we are not declaring bankruptcy."

Hines added that Ports of Call, owned by Oklahoma City oilman Clifford W. Culpepper, does hold some "very valuable property" and that should help the company maintain itself through the current recession.

Before reaching the agreement with O.I.L., Ports of Call did sell its working interest in an important Caddo County oil and gas lease for an undisclosed price to Robinson Brothers Drilling of Woodward, a company headed by J.D. Hodges. It was on that lease early last year that Ports of Call made a major natural gas discovery resulting in a spectacular blowout of its Tomcat No. 1 that made national news and attracted numerous other exploration companies to the area.

Ports of Call recently completed drilling its third well on the lease, the No. 14-1-2A. That well reached a depth of 16,049 feet, according to Bill Smithton of Robinson Brothers.

The first Tomcat well plugged itself naturally with debris after the blowout which for a while was releasing an estimated rate of 100 million cubic feet of gas per day. An offset well also blew out twice, leaving the No. 14-1-2A Tomcat as the third attempt to capture the large natural gas reserves in the section. Ports of Call spent an estimated $22 million on the Tomcat lease before selling its working interests.

Robinson Brothers Drilling firm worked as the drilling contractor for Ports of Call on the Tomcat lease.

Smithton declined to give the percentage of working interests that Ports of Call sold to Robinson Brothers.

Mike Culpepper and Other Creditors Say Clifford Culpepper's Bankrupt Firm's Debt Is Overstated

By Becky Tallent
28 Jul 1982
The Daily Oklahoman
Copyright 1982, The Oklahoman

Mahan-Rowsey Inc., which filed for a Chapter 11 bankruptcy in federal court in Oklahoma City Monday, may not actually owe $3.3 million to the creditors listed in its filing.

"They don't owe us a penny and haven't in the last three months," said Mike Culpepper of Mike's Dozer Service in Oklahoma City whose firm is listed as a $127,925.82 creditor to the oil and gas company. Culpepper (son of Clifford W. Culpepper) said his company did not even need to file liens against Mahan-Rowsey for previous dealings.

Another listed creditor, Toklan Oil Co. of Tulsa, said the Oklahoma City-based firm owes it less than $200,000 rather than the listed $500,752.

"We just brought suit against them (Mahan-Rowsey) for $181,000," said Toklan president Harrison Townes. "We have filed a lien and will foreclose on that lien, but it is for less than $200,000."

Townes explained that Mahan-Rowsey had entered a well partnership with Toklan and failed to pay its share of the costs. "But the well is good enough that we can attach their interest in the well and not lose any money," Townes said.

Deep Gas Exploration of Oklahoma City also is listed as one of Mahan-Rowsey's largest unsecured creditors. But Deep Gas officials also note that Mahan-Rowsey's debt to them was about $271,000, not the stated $384,979 in the Chapter 11 filing. Deep Gas president Kevin Leonard said his company filed a lien against Mahan-Rowsey three weeks ago.

Penn Square Bank was listed as one of Mahan-Rowsey's 10 largest unsecured creditors. But, according to the petition, company officials do not know how much is owed to the now-defunct bank.

Mahan-Rowsey refused to comment on the bankruptcy or the creditors.

According to the minutes of a special meeting of the company's directors, chairman William E. Rowsey III reported that the firm's deteriorating financial condition, "coupled with the past extraordinary behavior of its primary financing institution, make it impossible to continue to operate in the normal course of business."

The company's directors agreed to file for a Chapter 11 bankruptcy, which allows the firm to reorganize and pay back its debts according to a schedule approved by the federal bankruptcy court. The firm is currently a "debtor-in-possession" with Oklahoma City attorney Murray Cohen serving as the trustee.

According to an industry source, Mahan-Rowsey was one of the "bad" loans at Penn Square Bank which contributed to the collapse of the financial institution. In March of 1981, the firm purchased seven new drilling rigs at a total cost of $40 million which was to be paid out over two years.

"Drilling rigs are just like a millstone around a company's neck," said Townes. "A lot of bankers are now finding this out. Banks should have looked at the people involved when granting those loans."

"Within the past two years, some companies expanded rapidly and their banks gambled with them," he added. "But rig activity is down, and those people whose rigs are not paid for can't make their payments.

Clifford Culpepper's Ports of Call Oil Bankrupt; Takeover Mulled

By Becky Tallent, Bob Vandewater
10 Dec 1982
The Daily Oklahoman
Copyright 1982, The Oklahoman

Two weeks ago, Ports of Call Oil Co. of Oklahoma City was all prepared to be sold to a Utah firm that had made a deal last July to acquire it. But Ports of Call officials say they got stood up. And this week the company declared bankruptcy.

The company, whose principal stockholder is long-time Oklahoma oilman Clifford W. Culpepper, filed a petition for reorganization under Chapter 11 of the Federal Bankruptcy Code late Tuesday, citing as a contributing factor its unexecuted sale to Old Dominion Resources Inc. of Salt Lake City.

"All the necessary documentation to close the sale was completed on Nov. 26 in order to close the sale on Nov. 29," Ports of Call official John Stranger said. But Old Dominion officials never showed up for the closing, he added.

"Old Dominion breached its contract for purchase," Stranger charged. But he would not say whether Ports of Call will sue over the matter.

A different story comes from Old Dominion, however. A highly-placed source at the company, who asked not to be identified, said "it is true there was a tentative agreement to have the closing of the sale Nov. 29, which was a Monday. But late on the Friday before, we got some information that showed us that their (Ports of Call's) financial condition was not as had been reported to us by the company."

The source said that during lengthy negotiations that led up to the sales deal, Culpepper was unwilling to participate directly in the the talks, delegating that work instead to other officials of his company. However, two hours before filing the Ports of Call bankruptcy papers, those officials asked if Old Dominion management would talk to Culpepper, the source added.

"Old Dominion is still very interested in acquiring Ports of Call in order to get it back on its feet," he noted, charging that the firm has been poorly managed for a long time. But he said Old Dominion officials are in no hurry. The source said Ports of Call remains attractive, though, despite its problems because it holds some "potentially excellent properties," particularly long-term oil and gas leases in the area around Eakley and elsewhere in the Anadarko Basin.

It was there that in January 1981 Ports of Call made a giant natural gas discovery with its Tomcat No. 1 well, which blew out, spewing gas at an estimated rate of 100 million cubic feet per day, drawing national attention to the area. Since then the firm has spent an estimated $22 million trying, mostly unsuccessfully, to drill new Tomcat wells.

Two-year-old Ports of Call, one of about five petroleum related firms controlled by Culpepper, listed in its bankruptcy papers debts of $38,348,223, of which about $33.4 million is shown as unsecured debt. Assets were put at $41,676,200. Stranger said most of the assets are oil and gas results, not readily convertible into cash to pay debts.

"There was no contemplation by Ports of Call to file a Chapter 11 bankruptcy until Old Dominion chose not to complete the sale and fulfill the contract," said Stranger. But the Old Dominion source said Ports of Call "had been contemplating a Chapter 11 six months ago." He added that Ports of Call had been told by creditors, shortly before filing for bankruptcy, that they would force the company into court-ordered bankruptcy if bills were not paid.

Ports of Call's bankruptcy papers list three banks as the only creditors holding security: First National Bank of Tulsa, $2.5 million; the Federal Deposit Insurance Corp., $1.52 million, and Yukon National Bank, $790,000. The Old Dominion source said he had learned Ports of Call acquired a loan of about $11 million from Penn Square Bank just a couple of months before the bank collapsed in July.

Of Ports of Call's unsecured debt, $10,636,962 is covered by liens, the filing notes. The company listed as its major assets $22.063 million in oil and gas reserves, $5.125 million in undeveloped oil and gas leases and $12.19 million in accounts receivable.

$4 Million Cost Overrun On 3 Tomcat Wells Reported in Audit of Clifford Culpepper's Ports of Call

By Becky Tallent
25 Jan 1983
The Daily Oklahoman
Copyright 1983, The Oklahoman

Ports of Call Oil Co. had more than $4 million in cost overruns while drilling three very high pressure Caddo County gas wells, the first of which blew out dramatically two years ago this month.

The overruns are part of $25 million in total expenditures for the three Tomcat wells, according to an audit requested by an investor.

Washington Gas Light Co. of Washington D.C., which holds a 20 percent working interest in the wells through its subsidiary Crab Run Gas Co., requested the audit as "routine business," said spokesman Paul Young.

Oklahoma City business consultant W. Patrick Martindale's report said the overruns included drilling contractor rate overcharges, trucking services not performed, erroneous trucking charges, charges for different wells, excess overhead, excessive casing (pipe) charges and unsupported electrical charges.

Of the companies named in the report in connection with the "exceptions" overruns are TravelLear Inc., Tomcat Supply Co. and Global Mud Co., all owned by Oklahoma City oilman Clifford W. Culpepper, who also owns majority interest in Ports of Call. Also listed are Mike's Doziers Co. and Epco Petroleum Co., two firms owned by Culpepper's son, Mike Culpepper.

"This audit is not unusual, just good business practices especially when you are talking about exploration of this size and nature," Young said.

Ports of Call -- now trying to reorganize under Chapter 11 of the Federal Bankruptcy Code -- has not yet responded to the audit but expects to be able to justify the expenses, said Ports interim manager John Stranger.

"This is all they see on paper," Stranger said. "We will send our people out into the field and a lot of that stuff will be justified. The auditors just don't go into the field."

Stranger added it will take Ports about two months to file a response to the audit, partly because it took two years to drill the Tomcat wells and the company will have to reaudit all their expenditures.

One of the largest cost overruns came in connection with the No. 2A Tomcat, where according to the audit, 569 joints, or sections of seven-inch pipe were ordered from Tomcat Supply for $874,107, although only 71 sections of pipe were used.

"This is confirmed by invoice from the Nichols Casing Crews Inc., which states they supplied five men to run 2,750 feet of seven-inch casing," the audit states. "No evidence was found in the tour report, daily drilling reports or invoices that any additional seven-inch pipe was run."

The audit of expenses relating to the No. 1 Tomcat well, which blew out at a reported rate of 115 million cubic feet of natural gas per day, listed a $344,050 "unsubstantiated electrical charge" for electricity and transformer expenses for which no invoice was available.

The audit states a "substantial amount of diesel fuel was purchased and delivered to the diesel-electric rig during some months, indicating that the full-use electricity charged for was not actually used."

The audit also found $589,280 for mud chemicals and additives, representing 27,330 barrels of mud, was spent in connection with the No. 1 Tomcat. However, tour sheets from the rigs show 11,000 barrels of liquid mud were used on the No. 1 Tomcat, while 13,200 barrels were charged to the No. 1 Tomcat and 5,000 barrels were charged to the No. 1A Tomcat.

The Tomcat wells drew national attention when the first one blew out in January, 1981. After the first well naturally plugged itself with debris, Ports of Call twice tried unsuccessfully to drill a new well on the same location by re-entering the top of the original shaft.

When the second attempt failed, the company moved the rig and drilled the No. 1A Tomcat. But the casing on the No. 1A collapsed both on the original hole and the re-entry attempt. Finally, the company started the No. 2A Tomcat, which was also abandoned after problems developed.

After spending a reported $25 million on the three wells, Ports of Call sold its interest in the Tomcat leases last July to Robinson Brothers Drilling of Woodward for an undisclosed price. Robinson Brothers has completed drilling a fourth Tomcat well and now is attempting to complete it.

Mike Culpepper, Owner of Service Firms Says Bills On Tomcat Wells (Operated by his father, Clifford Culpepper) Not Overruns

By Becky Tallent
26 Jan 1983
The Daily Oklahoman
Copyright 1983, The Oklahoman

The owner of two oilfield service companies Tuesday said charges billed to Oklahoma City-based Ports of Call Oil Co. by his firms were not "overruns" but were for expenses incurred during work done at three Caddo County drilling sites that resulted in unsuccessful wells.

Mike Culpepper, owner of Mike's Dozers and Energy Petroleum Co., was responding to an audit showing $4 million in overcharges -- including some relating to work by his firms -- billed to participants in the three "Tomcat" overcharges.

Culpepper's attorney James Larimore said Mike's Dozer has the invoices "to back up every penny spent" on the three Tomcat wells. Culpepper also said billings made by Energy Petroleum were justified.

Ports of Call interim manager John Stranger said his company will justify any expenses in connection with the wells, but that the firm will have to audit the expenditures over the next two months.

"There was nothing typical about this well," Culpepper said. He explained that at sites like those in Caddo County where high-pressure wells are drilled, large areas must be cleared to make room for equipment and as a safety precaution.

The No. 1 Tomcat well blew out at a rate of 115 million cubic feet of natural gas per day in January 1981. The well later plugged itself with debris.

Culpepper noted that when the No. 1 Tomcat blew out, he was forced by the drilling company and the Oklahoma Corporation Commission to keep his crew and equipment at the scene to assist with the emergency.

Culpepper said that even though he could have employed his equipment elsewhere, he kept at least three dozers on the blowout site to help move the drilling rig, if necessary, and do other work.

Clifford W. Culpepper, owner of 51 percent of Ports of Call, operator of the Tomcat wells, is Mike Culpepper's father. But the younger Culpepper said his relationship with his father "is totally severed."

"When I invested in some of my dad's other wells when I was younger, I requested audit on some of those wells myself," he said. "But I have nothing to do with my dad. It has been nine months since I've talked with him."

Clifford W. Culpepper also owns 31 percent of Global Mud Co. -- no longer in operations -- and 40 percent of Tomcat Supply Co., making him the largest, single shareholder of the two firms.

Other owners of Global are the family of James Niles with a 20 percent interest; Mel Brazell with 17 percent; J. Carter Hines, 16 percent, and Jerry Tilly, 16 percent. Other Tomcat owners are Niles' family, 30 percent; Brazel, 7 percent; Hines, 3 percent; Can West, 15 percent, and Jim Fulton, 5 percent.

Oilman Clifford W. Culpepper Sued Over Penn Bank Loan

By Charles T. Jones
15 Jul 1983
The Daily Oklahoman
Copyright 1983, The Oklahoman

Oklahoma oilman Clifford W. Culpepper was sued Thursday in federal court for payment of an $11.7 million Penn Square Bank-generated loan.

Loan documents attached to the lawsuit, filed in Oklahoma City federal court by Michigan National Bank, show that Culpepper's original Penn Bank loan papers have been subpoenaed by a federal grand jury in Oklahoma City, which is investigating Penn Bank's July 5, 1982, collapse.

In its civil suit, Michigan National alleges Culpepper's Penn Bank loan is in default and it demands payment in full.

The Culpepper loan was assigned and transferred to Michigan National by Federal Deposit Insurance Corp. liquidators last May. The original copy of that notice of transfer also has been subpoenaed by the grand jury, court records show.

"Original of this document has been subpoenaed by the grand jury, Western District of Oklahoma," reads a stamp affixed to both the loan document and the transfer notification.

U.S. Bankruptcy Court records show that Culpepper-owned Glomar Drilling Co. Inc. of Yukon filed for Chapter 11 bankruptcy reorganization last December, listing its largest single debt as $11.7 million, owed for drilling equipment financed by the now defunct Penn Square Bank.

Both Michigan National and Chase Manhattan Bank of New York participated in that loan, but their shares were not detailed in Glomar's bankruptcy filings.

Glomar, a contract drilling firm, listed $17.3 million in debts and $7.5 million in property in its bankruptcy documents.

Another Culpepper firm, Ports of Call Co., also declared bankruptcy in December.

Two-year-old Ports of Call listed $38.3 million in debts, of which all but about $5 million was shown as unsecured. Assets were put at more than $41.6 million.

Seattle Bank Sues Oilmen Clifford W. Culpepper

3 Dec 1983
The Saturday Oklahoman
Copyright 1983, The Oklahoman

Seattle First National Bank filed suit in Oklahoma City federal court Friday to collect $1.9 million from oilmen Clifford W. Culpepper and A. C. Pletcher for default on a 1981 Penn Square Bank note.

The suit is also seeking interest plus an additional 5 percent penalty and attorney fees equaling 15 percent of the total amount.

The note was turned over to Seattle First after the FDIC declared the bank insolvent in July 1982 and assumed control of the Oklahoma City institution.

Culpepper and Pletcher allegedly signed guaranty agreements in the amount of $950,000 each when the loan was made on Oct. 6, 1981 to Hobo Drilling Co.

In signing the agreement, Culpepper identified himself as president of Hobo.

The suit alleges that a total of $206,569.21 in payments on the note resulted in overdrafts with Penn Square Bank.

The note has been in default since Jan. 4, 1982 with Culpepper and Pletcher refusing to make payment as agreed, the suit alleges.

Oilman Clifford W. Culpepper Must Repay Seattle Bank Loan

11 Jan 1984
The Daily Oklahoman
Copyright 1984, The Oklahoman

An Oklahoma City oilman must personally repay $1.5 million to a Seattle bank to cover a loan made by Penn Square Bank to his oil company, a federal court jury decided Tuesday.

The jury verdict held that Clifford W. Culpepper had guaranteed the loan, which later was sold by Penn Square Bank to Seattle First National Bank of Seattle, Wash.

A Culpepper attorney, Jack T. Crabtree, told the six-member jury that Culpepper had made the promise in connection with another loan application.

However, Culpepper contended that he didn't guarantee the loan, which was issued in late 1982.

Culpepper's attorneys argued that the guarantee papers, which Culpepper signed earlier in 1982, were mixed in with the loan application made by Culpepper's Ports of Call Oil Co.

The oil company has since gone into Chapter 11 bankruptcy proceedings and is considered a likely candidate for rehabilitation, Crabtree said.

During the trial, Spencer Simons, a Seattle First National Bank vice president who was assigned to Oklahoma City to help the bank collect on Penn Square loans, took the Fifth Amendment to avoid testifying.

Simons said he had been advised to say nothing about his knowledge of the Penn Square Bank-related dealings until after he has testified on the matter to a federal grand jury in Washington state.

Takeover Plans Give Boost to
Cliff Culpepper's Oil Firm

By Bob Vandewater
9 Sep 1984
The Sunday Oklahoman
Copyright 1984, The Oklahoman

The value of Champion Reserve Corp. common stock may be on a roll.

The price of this young, Oklahoma City-based oil company's stock has risen gradually from 2 cents per share a year ago to about 20 to 25 cents last month. By the end of last week it was trading at about 30 cents per share or more.

And Champion secretary/treasurer and controller Roger Baresel said, under oath, last Tuesday he believes in coming weeks ""the stock will trade at significantly higher than 75 cents per share and will continue to grow."

As if Baresel's projection wasn't optimistic enough, Melvin James, an officer and principal in the independent, Oklahoma City investment banking firm of Adams James Foor & Co., sounded even more bullish.

Also under oath, James said he believes Champion's market value over the relatively near term could reach between $1.50 and $3 per share.

The basis for these forecasts is Champion's pending takeover of Ports of Call Oil Co., a bankrupt firm whose acquisition nevertheless will increase Champion's size manyfold.

For instance, Champion, a highly leveraged concern whose stock is traded over the counter, has a net worth of just a little over $39,000. But officials estimate the company's net worth will be closer to $6 million after taking over Ports of Call.

A classic example of a little fish swallowing a big fish? ""Absolutely," said Champion's 36-year-old president John C. Roberts. ""I think it's inspirational," he added, noting the deal translates into jobs and income, the benefits of which should reach well beyond his own company.

On Tuesday in Oklahoma City, following a nearly six-hour hearing focused on Champion's bid to absorb Ports of Call, U.S. Bankruptcy Judge Robert L. Berry ruled the acquisition to be ""fair and equitable" to the bankrupt firm's creditors.

Thus, Berry confirmed the takeover plan. That action set in motion a sequence that could lead to the acquisition being completed in as little as three weeks, although it may take longer due to matters related to administrative claims against Ports of Call that were left before Berry still to be ironed out.

These remaining issues are not expected to pose a serious threat to the deal. But they could substantially increase the $600,000 to $700,000 of administrative claims (legal fees, etc.) against Ports of Call's estate to more than $4 million if fully accepted.

That would add to the overall value of the Champion takeover transaction, now projected at a little more than $13 million, including $7.5 million in borrowed cash Champion plans to use to help pay off or settle debts to Ports of Call's secured creditors.

Hearings on the additional administrative claims may be held, which would delay completion of the deal. Ports of Call interim manager John Stranger said delays at this point are critical because every month that passes without settlement of his firm's bankruptcy case adds $60,000 to $70,000 in new interest expenses.

Voting by Ports of Call creditors in favor of the Champion acquisition was not heavy enough to assure approval without a finding from Judge Berry that the arrangement was the best one available for all concerned.

One creditor category that did vote dollarwise more than 3 to 1 in favor of Champion's plan was Ports of Call's unsecured trade creditors. Nevertheless, Richard Bailey, attorney for a committee of major unsecured creditors, struggled, unsuccessfully, to convince Berry to turn thumbs down on the plan.

Claiming his clients were ""unfairly disadvantaged," Bailey urged acceptance of an alternative plan. Under it, Ports of Call would essentially be reorganized and continue to operate under direction of a board made up largely of major trade creditors.

That alternative failed to win enough support from all classes of creditors, including the unsecured trade class, even to be further considered, Champion attorneys told Berry, who ultimately agreed.

Thus, under Champion's takeover plan, Ports of Call's unsecured trade creditors, who accounted for more than $25 million of the bankrupt company's over $40 million in debt, will have to settle for a recovery on their claims of only 15 cents on the dollar.

Had Ports of Call been liquidated, which Champion officials said probably would have happened even under the plan Bailey supported, unsecured creditors likely would have ended up with only 8 cents on the dollar, or less, officials added.

Under the confirmed plan, though, unsecured creditors generally will divide up 4.75 million shares of Champion stock or enough shares to equal a $3.75 million value. Or these creditors can opt for 80 percent of their recovery to come from sales of certain oil and gas production, with the other 20 percent value coming in Champion shares.

Either way, obtaining Champion shares gives unsecured creditors a chance to see their recovery appreciate in value along with the stock price, assuming it continues to rise beyond the 75 cents per share level on which the 4.75 million figure is based.

Baresel testified the number of shares to be transferred to unsecured creditors will be based on Champion's stock price at the middle of a five-day trading period.

That period begins 10 days after Ports of Call's confirmed plan for a takeover by Champion becomes final and unappealable, with the validity of all administrative claims settled. Champion officials said the earliest the trading period could begin is 20 days from last Tuesday.

A third of the Champion stock to be transferred to unsecured Ports of Call creditors will be unrestricted, meaning it will be available for sale by the creditors as soon as they own it. But Champion officials said they doubt all the new shareholders will choose to immediately sell their stock or take any other action that would have a materially adverse affect the value of shares.

Instead, pumping up the value of the stock will be the potential earning power and strength for future acquisitions that Champion will get out of the Ports of Call takeover, Baresel testified.

The staying power and growth potential of Champion stock is so attractive Adams James Foor agreed to accept in lieu of a cash payment for certain services an option to buy 320,000 Champion shares at just 5 cents per share.

Ports of Call's liquidation value was projected by Stranger at about $10.44 million. That basically, worst-case scenario includes $6 million to $6.5 million as the estimated liquidation value for the company's proved developed reserves, a relatively minor amount _ possibly less than $200,000 _ for the firm's purely undeveloped oil and gas acreage, and an estimate that no more than $3 million of Ports of Call's $9.2 million in accounts receivables on the books are collectible, Stranger testified.

Accepting that view means a liquidation would not return enough cash even to cover the $10.9 million in secured claims against the company, according to testimony.

However, as an acquisition by Champion, Ports of Call is worth much more than its mere liquidation value.

For starters, Ports of Call, founded late in 1979 by Oklahoma oilman Clifford W. Culpepper, is the same firm that drilled the famous Tomcat well near Eakly. That initial well drew national and even international attention early in 1981 when it blew out of control, belching an estimated 100 million to 150 million cubic feet of natural gas per day before plugging itself with sand and shale pushed up the hole by huge pressures.

A later Tomcat well drilled on the same site is now flowing at about 5 million cubic feet per day from a reservoir believed possibly to contain billions of cubic feet of gas, officials said. Problems in collecting joint interest billings associated with the $19 million cost of drilling the first two successful wells in this area contributed to Ports of Call's bankruptcy, filed late in 1982.

Culpepper, owner of 51 percent of privately held Ports of Call's stock, will, along with other shareholders, get nothing out of the takeover by Champion, which, however, gains Ports of Call's fractional interests in the Tomcat and other wells.

Champion, established less than a year ago out of a shell firm named Gemlite Inc., earlier this summer projected it could gain $14 million in future revenue from Ports of Call's proved, producing and shut-in reserves and ""conservatively" $25 million in future revenue from projected offset wells, increased well density and exploration of new zones in existing wells.

Ports of Call cash flow projections suggest Champion could get back within about five years or less all it plans to spend on the acquisition. If petroleum prices rise, payout speed and the value of the reserves would increase.

In addition, $8.5 million in past Ports of Call net operating losses, which could grow to $12 million, would be worthless in a liquidation but ""could be worth 10 cents on the dollar to a buyer," said Stranger. To what extent Champion will be able to take advantage of these operating losses remains to be seen.

Drilling on much of Ports of Call's undeveloped acreage would have to begin rather quickly, too, since ""most of the acreage expires in the first quarter of 1985," Stranger said.

Since Champion's inception, company officials have made no secret of the fact they planned to pursue the acquisition route to building a mid-sized independent oil and gas firm. Acquisition of Ports of Call would mark a major step toward achieving that goal.

Belly Up Reflects Rolls By Big City Bankers In Penn Bank

By Max Nichols
12 Oct 1985
The Journal Record
Copyright 1985, The Journal Record

There is a huge difference between "Belly Up," the latest book on the Penn Square Bank failure, and "Funny Money," which was released last May. 4.

"Funny Money," written by Mark Singer, seemed to concentrate on the Oklahoma bankers and oilmen who piled up the bad loans of Penn Square Bank. It was written with a tone which seemed to say Oklahoma accepts crooked business leaders and politicians.

- "Belly Up" is much broader in scope, concentrating far more on the roles played by bankers, oilmen and business leaders around the country, as well as those in Oklahoma.

It includes more detail on the motivations and contributions of energy lenders and leaders in organizations such as Continental Illinois National Bank & Trust, Seattle First National Bank, Michigan National and Chase Manhattan.

It also places more emphasis on individuals such as Byron Tarnutzer and Kae Ewing of Newport Beach, Calif., Casey Foss of San Francisco and the roles they played in the letters of credit spawned by Longhorn Oil and Gas of Oklahoma City.

However, "Belly Up" provides no escape for Oklahomans and their contribution to the Penn Square Bank fiasco.

There is extensive detail on former Penn Bank Chairman Bill Jennings as the "promoter deluxe," on Bill Patterson and the ways he churned out more than $2 billion in energy loans that were largely bought by upstream banks, and on Thomas S. Orr and his quarter-horse deals, plus numerous others.

Zweig describes some of the role played by Robert A. Hefner III in opening up the deep gas of the Anadarko Basin, plus those of oilmen like Hal Clifford, Cliff Culpepper, J.D. Allen, and Carl Swan.

In addition, he reports some of the escapades that went with the oil and gas boom of the early 1980s, including parties, drinking out of shoes and "show dog" women who entertained customers.

However, that kind of thing played a minor role in "Belly Up."

Instead, Zweig managed to keep his focus on the much broader issue:

How Penn Square Bank and the oil and gas boom became a hub for a giant wheel of reckless, poorly documented and shady loans through the ambitions of people from California and Seattle to Chicago, New York, Florida and New Orleans.

That wheel, spinning faster and faster, finally went out of control, flying off its axle and finally crashing in the bankruptcy and liquidation of Penn Square Bank.

It's Zweig's detailed reporting on these widely spread elements that makes "Belly Up" stand out - plus the way he draws them together into a package that far outweighed its under pinnings.

Zweig's case is that Penn Square Bank eventually had to crash, because the falling prices of oil and gas had to bring down the house of cards, which included a maze of loans made to pay off loans that were not solid in the first place.

However, it was the people who made the difference, not the institutions. It's one more example of the age old lesson that the fortunes of institutions, such as Continental, Seattle First and Chase Manhattan depend on the people involved in the leadership, no matter how large the institutions get.

Continental Illinois played the largest role, of course, purchasing more than $1 billion in loans from Penn Square Bank.

To understand how that happened, Zweig went back into the bank's history as a conservative but premier energy lender. A decision for Continental Illinois to become a more aggressive lender was made by Chairman Roger Anderson before the bank teamed up with Jennings and Penn Square Bank.

In 1977, Continental had $16 billion in deposits, while Penn Square Bank had $60 million. However, both were shaped by regulatory forces that included unit banking. They came together in 1978 when Continental participated in a $1.5 million loan to Lammerts Oil Co. of Oklahoma City.

Patterson met Vice President John R. Lytle of Continental in completing that deal. At that point, Lytle had little background in energy lending, but that deal led to Lytle and Patterson working together on more deals. Lytle eventually took over the energy division of Continental.

The relationship of Lytle and Patterson was the primary reason for the participation with Penn Square Bank eventually leading to the downfall of the giant Continental, according to Zweig.

Longhorn Oil and Gas, meanwhile, headed by Allen and Swan, was beginning to use letters of credit in financing its Longhorn 1978-II drilling program. Investors put up 25 percent or $750,000 of a subscription of $3 million. They obtained letters of credit from their own banks in favor of Penn Square Bank for the difference.

Then, the letters of credit were used as collateral for loans by Penn Square Bank for the other $2.25 million plus an origination fee of one-half of 1 percent. Continental Illinois would purchase $1.95 million in participation, leaving Penn Square on the books for $300,000.

The idea was for the loans to eventually become production loans while investors wrote off 70 percent of their investments in drilling costs. Since Penn Square Bank's prime was higher than Continental's, the Chicago Bank was making prime plus 2 1/2 percent.

All this was promoted by Jennings and Patterson with Lear jets, helicopters, nightclub dinners and a dog-and-pony show, said Zweig. Tarnutzer, Ewing and Foss were among those playing leading roles.

On Nov. 1, 1979, deep gas was deregulated, largely from the efforts of Hefner. That led to the financing of the expensive well of 15,000 feet or deeper, with pipelines eventually paying as much as $10.10 per thousand cubic feet.

This, in a period when long-term gas shortages were being projected, fueled the gas boom in Oklahoma City, which meant an increasing demand for loans to finance increasing numbers of fledgling companies.

Seattle First entered the picture with its own determination to become more aggressive, according to Zweig. Vice President John Boyd started prospecting in the southwest. He was described by Zweig as similar to Patterson and Lytle in that he was "an extraordinary salesman and a poor detail man."

Eventually, Seattle First began competing with Continental Illinois for participations in Penn Square Bank loans. This led eventually to a package of $200 million in loans dropped by Penn Square Bank on Seattle First in December 1981.

It was called "dump truck banking."

Meanwhile, there was the incredible blowout of Clifford 's Tomcat well in western Oklahoma, the growth of Hefner and GHK Companies, the coming of new players such as Tom Chilcott of Colorado, George Rodman, the Mayhan Rowsy firm, Jere Sturgis and numerous others.

Northern Trust of Chicago entered the picture in 1979, led by Mike Tighe and petroleum engineer Frank Creamer. Chase Manhattan had its own background of overcoming problems and took on small loans. Michigan National, headed by Chairman Stanford Stoddard and President Perry Driggs of the Lansing unit, took loans left over by the others.

"We were pleased to have been accepted initially, as well as later, into what we perceived was a fraternity of reliable lenders," said Driggs, "including Continental, Chase Manhattan (Citicorp), Seattle First and Northern Trust."

Hibernia of New Orleans and 47 other banks eventually bought pieces of Penn Square Bank loans.

Bank examiners began to see problems in 1980, and examiner George Clifton Jr. turned up a "rat's nest" of bad loans in 1981. Penn Square Bank was given a 3 rating, which meant there were problems.

Eldon Beller was hired by Jennings as a result of pressure from the examiners. However, Zweig makes the point that Beller was not allowed to control Patterson.

By 1982, shortly before the closing of Penn Square Bank, examiners pinned the exposure of upstream banks to Penn Bank loans at $1 billion for Continental, $366 million at Seafirst, $267 million at Chase Manhattan and $172 million at Michigan National.

While Penn Square Bank certainly was the focal point of this financing debacle, and while Oklahoma oilmen played a major role with the top bank officials, it is clear from "Belly Up" that Oklahomans were not alone in their greed.

It took major contributions by bankers and financiers from coast to coast with the Oklahomans to turn a small Oklahoma City shopping center bank into a national disaster.

Key Players In Failure Have Moved; Still At Work; Laying Low

By Lou Anne Wolfe
5 Jul 1986
The Journal Record
Copyright 1986, The Journal Record

What do you do when your $525 million-asset bank fails, and you become the target of a host of lawsuits and the subject of two different books?

A Journal Record search revealed that some of the key players in Penn Square Bank have left Oklahoma. Others continue to work business deals, both inside and out of the state, while still others are laying low until their day in court.

Here's a list of some of the bank's former officers, directors and key investors, and the results of attempts to contact them.

…Clifford W. Culpepper, a Penn Square Bank borrower, former head of Ports of Call Oil Co., which filed for Chapter 11 bankruptcy reorganization in December 1982 (later acquired by Champion Reserve Corp., now in receivership): A telephone call to Culpepper Oil Co. in Oklahoma City was answered "Wishbone Oil." A staff member said Culpepper maintains a skeleton crew in Oklahoma City, but spends most of his time out of the state and out of the country. Asked for a number where he could be reached, the staffer said: "I don't call him. He calls me."…

Penn Square Players Continue Varied Lives

28 Jun 1987
The Sunday Oklahoman
Copyright 1987, The Oklahoman

EDITOR'S NOTE: Five years ago next week, regulators stopped the show at Penn Square Bank. The colorful characters who worked for or with the failed bank subsequently became the subjects of two books and countless articles, lawsuits and conversations. As the fifth anniversary of the bank closing approached, reporter Lou Anne Wolfe compiled the following summary of where the Penn Square players are now.

…Clifford W. Culpepper, PSB customer and founder of Ports of Call Oil Co. in Oklahoma City, which drilled the famous Tomcat natural gas well near Eakley: A woman who answered the telephone at Culpepper Oil Co. in Oklahoma City said Culpepper is rarely in town. She declined to confirm rumors that he now lives in California. Ports of Call, one of about five petroleum-related firms controlled by Culpepper, filed for Chapter 11 bankruptcy protection in December 1982, listing debts of $38.3 million and assets of $41.67 million. The company was acquired by Champion Reserve Corp. in 1985 but subsequently was placed in receivership. The case is pending…

Culpepper Ancestry. Clifford W. Culpepper is believed by Culpepper Connections! to be the son of Oliver C. Culpepper who was born in 1901 in Alabama and died in 1935 in Oklahoma. If you can confirm this or have other information, please contact Warren Culpepper.