HOW OIL BOOM WAS FOISTED ON PUBLIC

NZ Truth, Issue 1212, 21 February 1929, Page 1

HOW OIL BOOM WAS FOISTED ON PUBLIC

MOTUROA is a small, Isolated offcasting of land some three miles to the south-west of New Plymouth. The sea flanks its western sector, while to the eastward stretches a vast area of land similar m potential wealth to that of Moturoa, traditionally fecund as an oil-bearer, actually prolific m oil stories. The history of Taranaki is riddled with narratives of oleous outbursts. For years the province has abounded m oil that was, but particularly of oil which shall or ought to be, and even as many people were fooled by wily company promoters m America -not so many years ago, so is there the likelihood of New Zealand and Australian investors adding their sorrow-tuL^ewlde^ice:i-toi^the^crazy- pile^which-, forms the history of I oil;-' and -the disillusionmient^it rtoay bring. w „.",-- ;/In : a 'bijou 'form the recent history of Moturoa is much after the pattern of other, and older, oil ventures elsewhere. A temporary manifestation of oil for ninety seconds was overshadowed by computations as to . what this represented, for an output lasting one hour; guardedly worded reports were disseminated by the directors through the medium or telegraph and cabled lines.

Wild Scramble To Get Rich Quickly Leads To Airy Visions of EJ Dorado That Is Unlikely To Yield Dividends i (From "N.Z. Truth's" Spedal Commissioner.)

Oil! That bland, evasive quality at whose shrine worship avarice and cunning; before whose flickering, altar-candles hope and despair dance hand m hand, while the hard, feverish eyes of Speculation stare fixedly over the backs of the worshippers, watching, waiting, to snatch any boon which the altar may bestow. Many are the tales and myths which have fallen from the mouth of the Oil acolyte; many a mountain of human and commercial rubble bears pathetic testimony to the gullibility of mankind. Mark, then, this warning, which tells of much hood-winking and glib misinformation concerning a misdeal m oil at Moturoa.

Scramble For Shares

Sydney and Melbourne, stock exchanges were aflame with the news that a "gusher" was disgorging thousands of gallons hourly from a tiny fracture m Taranaki soil. > ' Christchurch, . Wellington and Dunedih were bidding, hrart m mouth, for a share m. the spoil, clamoring for foothold' in the scramble for shares m the Blenheim Oil Well Reclamation Company, Limited.. ■' On February 4, sellers of Blenheims were lazily hawking themselves at 15/---on the Christchurch market. Eighteen ■„ hours later they were whistling their way to the heights — 50/- : in the morning, 70/-. . m the afternoon — for the wires had been busy overnight with the news that there were fountains of oil at Moturoa. Coincidental to the phenomenal rise m the price of Blenheims came cabled advices from Australian stock exchanges that Taranaki Oil Well offerings -had risen m .sympathy. , ■■ Taranakis came into, the sunshine created by the glow of Moturoa reports, and for some days the markets m Sydney and Melbourne resounded to the clamor. From close investigations made m New Plymouth, it appeared fairly certain that. a,. plethora of half-truths had been circulated by interested parties there, by cable to the Commonwealth and by telegraph to the principal markets of the Dominion. Some, most extravagant narratives appeared m the columns of Ausfraliari newspapers — twisted, garbled outlines of an oil fever which was to sweep through the Dominion, tales which were almost amusing, save for the unrest and disappointment which the true explanation undoubtedly has brought. On' the fringe of Blenheims' glory, then, came Taranakis, cap m hand, for the inspection of investors. And, since oil was oil, and New Zealand far enough away to add glamor to the gamble, Taranakis, roused from a protracted lethargy, doubled themselves m price within two days of Moturoa's ninety-seconds endeavor. . On the other hand, with the circulation of a statement made by the chairman of directors on February 13, m which he outlined the true position of the output, came the slithering decline of Blenheims, and, with them, but m a lesser degree, the tightening up of Taranakis, which fell almost as quickly as they rose. The unfortunate moral of this spurious inflation is that legitimate oil development companies m the Dominion might seriously be affected should they achieve any degree of their prospectus hopes. Then, too, is the viewpoint from another side of the matter, wherein prospectors who had scientifically detected the presence of. oil m appreciable quantities beneath the surface of Taranaki or other sectors, might find it difficult to secure financial support which, but for the disgraceful example of the Blenheim hoax, might readily be forthcoming. Considering the , Press Association message accredited: to S. E. Nielson, the company's secretary, the hare-

brained scrambling for shares .gives no occasion for wonderment. "The Blenheim bore was uncapped to-day for the purpose of taking a measurement of the flow . . . proved to be at the rate of 4,000 gallons an hour. The well was again sealed, pending the. . completion^ s g£ u the'...instal-, latioh of conduit "'pipes to take oil' from the mouth ,of the bore to steel reservoirs.' Although this work. Was to have been completed to-day, it is hot now expected to be finished befbre! Thursday ..." The dreamers of dreams conjured visions of gigantic oil excretions, Elysian wealth, automobiles and ■ bowing footmen. Acting on the principle that you cannot receive without giving; they plunged recklessly into the scuffle for holdings, with the result that by Thursday, February 7,. Blenheims were ticketted at £ 6/1/6 at Christchurch, and £6/10/- on Sydney. 'Change. It will be observed, that Nielson made no reference to the period for which the Moturoa tricklet flowed, a most significant omission, and one which neither he nor the directors could satisfactorily explain to a member of "N.Z. .Truth's" investigation staff. Nielson and the chairman of directors, a man named William Percy Martin, attempted to foist the burden of responsibility on to the shoulders of the : Press Association representative m New Plymouth. As "Truth" pointed out to them and other directors, it was hardly likely that such a statement, glaringly false as it was, would .be broadcasted on the volition of the trained newspaper men handling the story. They were silent when this viewpoint was made clear to them, but they could offer no explanation, nevertheless. Nor could they explain why the directorate allowed a period of ten days to elapse before it screwed up its courage to tell the truth about the ninety seconds flow of oil, a period m which a number of , people made quite a lot of money. The tabloid history of this gamble, as Martin described it, is that on Friday, February 1, the oil bore at Moturoa blew out at four o'clock m the afternoon, but the flow was immediately quenched by. the , insertion of a

lously failed to' make that clear until ten days later, the same equation becomes sinister and ill-begotten. Between Tuesday, February 5 and Wednesday, nine days latei\ much hay was made, one or two directors, turntheir shares over and over, while the ; secretary,^ whp v 4S;. v^ 'and W7> a'' > 'i>t(.bH'c'; , "accountant, sold some i3hares"on v his. own account., „ During the ten days, some of the directors must have indulged, themselves m a little heart-search-ing, for on Wednesday, February 13— a numerical omen if ever there were' one — Martin made an official statement which was as true as it j was startling. : "On February 4," he said, "when the bore was. uncapped, for the purpose ..of measuring the flow, oil flowed at- the rate: of 4,000 gallons an hour for a period of°about a minute and a-half. The flow then ceased,- due, it is sur-

for £144, but sold ten for £45, on a rapidly rising market, and between that date and February 9 he appears to have niade further extensive purchases. According to the returns available, he acquired 3GO shares for £930, and McNeill denied having sold, any shares, save 'that he 'admitted there -was "just a little .flutter ' among the directors," but according to the share register, he disposed of £625 worth of shares on . February . 5 to a man living m ,* Stratford. At least three names mentioned' inhis share transactions do not appear m the list of directors filed m the offiice . of the Registrar of Companies at New Plymouth. ' , John -Shepherd, a director, bought 42 shares for £JLB9 and three for 1 £16/10/- on February 6, selling 20

.... - • transferred, 50 for £300 to a fellow director. In tne share account of Jones ap-peared-a transfer of 60 shares -to McNeill, while Sandford's account aiso showed a transfer of 40 shares to the same director. ..■..J.onn.-JPiudiayvtransferred^^.shfires^tOi McNeiil and 20 others to another person.. ... •'.,... ,,.-. ' . ■ ; ...••■ ./' ■ v Jones and Sandford declare that while they and some, of the other directors were paying a visit of inspection at the well on the day following the manifestation of oil for the ninety-seconds period, McNeill ,rustied up to them, flourished a sheaf of cheques m their faces and said, excitedly: "Who'll give me options at £2 a share?" Several of the directors did take advantage of MuNeiil's offer, but some of them revoked the implied contract by paying McNeill a premium for the advantage of eluding the terms of option. Now, whether or not the directors actually received any money for all the share transactions outlined above, it is evident that the' result of their, operations wouid have a lifting effect upon the market, since' the interested parties would not , permit the news to remain uncovered that numerous sales were being effected." At one stage of the interview with McNeill, he . said he had exercised options' on shares, but that was the extent of his operations. Later, he admitted selling a number of shares to a retired man living m Stratford. There were no entries m Nielson's share account at the time an inspection was made of the share register, and when he was asked some questions concerning the . lack -of entries, the secretary, replied that the documents and particulars had not yet returned from his agent m Christchurch, who, curiously enough, has adopted the telegraphic address of "Gloaming." The following morning, the investigator returned to Nielson's office, asked for the share transfers once more, and found the transfer sheets mentioned above lying on the top of the other transfers. Nielson positively ■ denied his being the author of the original message sent through the Press Association. If, then, the directors were aware of its falsity— and they must have been, surely?— -then it

Well Sealed Again

three-hundredweight "cap," ' which was left m position until representatives of the Press, directorate and I shareholders arrived at the well site. The cap was again lifted, and an emission of oil was manifested between the seven-inch and ten-inch casings- of the well. The well was sealed once more for the purpose, it was said, of . connecting the well with the two steel reservoirs, each holding 45,000 gallons, situated about forty yards from . the derrick. . . That night an urgent message, was dispatched to E. W. B. Horriabrook, reputedly a representative of a Sydney organisation interested m the development of oil wells, with the result that Hornabrook made an all-night journey from ■ Masterton, arriving at New Plymouth early qn the Saturday morning. , _ - . A demonstration . was staged : for his benefit during Saturday afternoon, after which the steel cup was re-in-serted so that the original purpose of connecting the well with the 'tanks might be effected. On Monday, the well disgorged a stream of oil at the rate of one and one-ninth gallons a second, but .for 90 seconds only. Nielson and the directors were not at all squeamish when it came, to the problem of extended 1 arithmetic, since they permitted the broadcasting of a message which computed the output at 4,000 gallons an hour. > ... Certainly, 4,000 gallons an hour is the same rate as 100 gallons m 90 seconds, and; the equation is both sound and meritorious if maintained for one hour or more, but when the, well collapsed from the strain of its own violence at the* close of the ninetieth second, and since the directors sedu-

mised, to what is known as a gas lock. "Oil has not since flowed from the bore . . . the work of drilling and bailing is now proceeding night, and day." " Meanwhile, Martin bought 323 shares for £1136/10/-, and sold 200 shares for £937/10/-, as indicated by the share register and share transfer sheets scrutinised by "Truth's" investigator when he visited the company's office m New Plymouth last week. . 'One hundred of these shares 'he sold for £400, fifty for £275, and a similar number for £262/10/-. : If share registers and share transfers do not lie, then James McNeill, another director, also was active. ' On the day following the ninetyseconds burst of oil, McNeill. purchased 28 shares for- £56, but sold one parcel for fifty at £225 the lot, a parcel of 100 for £250, fifty for £150, and twenty for £30. . , - . On February 6 he bought 72 shares

for £80 and 100 for £300 on the same day. The day following he purchased a further fifty for £262/10/- and sold 47 at £235. Nielson, the secretary, said he sold a few of his own shares, but refused to handle any outside of these. Henry William Jones and Arthur Frederick Sandford, partners m a building enterprise and directors of the Blenheim Oil Company, told "Truth" that all the shares sold by the directors passed through the hands .of Nielson. The secretary declared that his original holding- of 109 shares had. merely dwindled to 60 shares, but according to share transfers which appeared : on the share transfer file 'in his office, he sold fifty shares for £250, 10 for £30 and 20 for £80, all on February 6, the. day. after. the Press Association, message 'appeared m the newspapers throughout the country. Henry "Williamson; a . director, acquired 50 shares on the seventh- 'and,, 57 on February 8, while he sold, or

Directors Invest

was their duty immediately to publish a statement m retraction. Jones and Sandford quite candidlyadmitted that the directors sold shares while they, were able to sell, that they took full advantage of the offers held out to them, even though they expressed their implicit faith m the undertaking. . Williamson and Martin, during , a conversation with "Truth" m Devon Street, New Plymouth, last Saturday morning said they had sunk a lot of money into the company, and naturally would/take full opportunity of recouping .themselves wtien the occasion arose. • If they were sincere m their contentions that the company must undoubtedly make good, that it had a wonderful, Undoubted future, the disposal or manipulation of their shares seems illogical beside their outspoken faith m the project, since to have held their shares would have meant an ultimate profit far beyond what they expected from the shares which some of them undoubtedly sold, as both Jones and Sandford admitted. They all stressed the point that at the present time the directorate held ten per cent, of the issued share capital, but such a statement is meaningless when one recollects "the probability that shares changed hands a -number! 'of times during the ten days of studied silence on their part; when they withheld the true position of. the well from the investing public. The point is: How violently 'did their holdings .fluctuate between February 5 and February! 1 3, when the chairman made the astounding statement that oil flowed for 90 seconds only, resulting m the partial collapse of the market.-

What was the true reason for their continued silence? The reason adduced here may not be the correct one, but at least it is a logical deduction. It is believed that this intriguing atmosphere around the functioning of the well at Moturoa was but the surrounding fringe of a scheme to attract the notice of Sydney financiers, whose palates had been titillated by the rumors and partially true information disseminated throughout New Zealand and the Commonwealth. The directors gave notice that a meeting of the Blenheim Oil Well Reclamation Company, Limited, would be held m the Workers' Social Hall on February 20 to discuss the question of increasing the,present-nominal;,capital-o6f-^B£o;QOb^fey - a^f urtlver -^OOOr^inW they had been approached "wi th / pro - pbsajs- to provide capital for the cbmpany's future operations, and . V\. they; desire to discuss with the shareholders the. general policy to be. followed by the directors." Also: "In addition to the £5000 of: capital contemplated „ . . there are 7000 shares remaining unallotted, which, according to the Articles of Association, must be offered to existing shareholders-be-fore being offered elsewhere." It is understood that the organisation

Interest In Sydney

or organisations which had "approached with proposals to provide capital for the company's future operations . . . "was none other than that represented' by • Ernest.. William Brown Hornabrook. If : the directors were successful. in securing the interest . : of the Sydney group by pushing through the resolution providing for the extra £5000 capital, as well as securing the consent, of shareholders to issue a further 2000 or 3000 shares of the existing unissued capital, it seems fairly, evident that when THAT piece of information was sent clicking over the wires opened by the Press Association, .investors throughout" the two countries, and, j maybe, America as well, would reason that the surrounding, conditions;- and potential "welfare of Moturoa were, very good indeed: ' But what prompted Martin to publish that damning admission that the flow of oil lasted for 90 seconds? Did> someone force his hand, or had he lost sight of the disturbing effect such a pronouncement would have upon the share markets? ■■ Two, at least, of the directors dolefully prophesied to "Truth" that the proposal would "fall flat," as they expressed it. Reverting to the question of carefully worded reports sent out by . the directors. Martin declared that these "were nothing like the reports sent out by the Press," which seems to indicate that he arid his fellow executives were fully aware of tho misleading statements which, SOMEBODY had made, but for some inscrutable reason, known more particularly to -themselves, ■ they refrained from making any official statements m rebuttal. • , Was.it because they wished to maintain the -comparatively buoyant condition of the share market until the meeting of shareholders? ; If that is so, who forced their hands when Martin made the statement which outlined the true position of the well? It was the intention of the directors to secure the interest of Hornabroolc. as agent for the Sydney group, m the formation of a larger company, so that the Blenheim bore' might be properly developed, refineries installed, and adequate capital provided for the successful operation of the concern as a whole. The whole situation may be crystalised into the words of advice given to "Truth's" representative by one of the leading sharebrokers m New Plymouth. He told the ■ representative of this paper, who, for the purposes of this Investigation posed as a possible investor In Blenheims, to be careful, and made a strong inference that the shares of the Blenheim Oil Well Reclamation Company, Limited, were not a wise investment for a young man with some money lying around at a loose end. At i the. present moment' such ' advice is unquestionably sound, and until Blenheims have a house-cleaning, and the conduct of the company's affairs Is placed upon a more stable ledge of security, it would be. well for the people of New Zealand and Australia to accept any information concerning the well at Moturoa with a heaped measure of table salt i