Small cap investing is a lesson in perseverance. If you give up, you will lose. But if you stay in the game and keep working at it, you will win over the long-term.
Today and tomorrow I want to tell you a story about perseverance in the Texas oil fields.
It’s a story I told subscribers of 100% Letter in early 2011, as a lead in to a report I wrote about investing in the emerging oil fields in East Africa. I wanted to motivate them to take action and invest in a very small oil explorer, despite the risks.
It’s a story about perseverance, trusting your gut and rising to the challenge. It’s also a story about creating wealth through hard work. It reminds me of what it takes to be a successful small cap stock investor.
I hope you like it…
“Allen and Curt Hamill arrived in Beaumont, Texas in 1900 to drill the fifth hole on Big Hill.
These guys didn’t care that their drilling strategies were different… they were accustomed to improvising. The two brothers had made a name for themselves in the Corsicana, Texas oilfields in 1894 with a big hit.
Back in those days a good well produced 50 barrels a day. Nothing like the 1,000 plus barrels that come out of some Texas wells today.
The Hamill brothers weren’t expecting to change the face of oil exploration forever. They just did what made sense to keep the drill turning.
When the sidewalls of the fifth hole started to collapse, Curt realized that he could make a slurry mix of mud and water by driving a herd of cattle around the slush pit. This mud lubricated the pipe, and helped to keep the drill turning.
But it didn’t solve the problem of muck getting into the drill-pipe when the pump was shut down. One restless night Curt, Al and their roughneck Will ‘Peck’ Byrd built a crude back-flow valve with a wooden board and a rubber belt.
Today, this piece of equipment is known as a float valve, and it’s still used to keep mud and cuttings from flowing back up and into the drill pipe, significantly cutting downtime.
The drilling project had already run out of money twice. Patillo Higgins, the man who initially got the project started, was cleaned out.
He’d formed the Gladys City Oil Gas Manufacturing Company to go after the oil at Big Hill. But at 400 feet down he ran out of money.
When Captain Anthony Lucas arrived Higgins had a new partner, but Higgins only retained a 10 percent working interest. The new partners got down to 575 feet before the pipe collapsed.
Needing money, Lucas struck a deal with two Pittsburgh oil prospectors to back the project. His share was cut down significantly, and Higgins was cut out all together.
That’s when Al, Curt and Peck arrived. The boys started drilling on October 27th, 1900. On January 10, 1901 they had reached a depth of 1,139 feet.
Curt recalls what happened next in this excerpt from his book, We Drilled Spindletop:
“On the morning of January 10 we broke through the hard rock into a crevice. Our pipe would go down perhaps two feet into this crevice, but we could not turn or rotate it. We decided that our bit was dull. We pulled the pipe out of the hole and put on a sharp bit. We started back down in the hole…
I was on the scaffold board, up in the derrick. We had gone back into the hole about 700 feet when the well blew out.
The first puff hit me and I was blinded by mud and oil. I went to the ladder to climb down…”
Find out what happens next in tomorrow’s issue of Daily Profit!
Also, if you’d like to discover one telltale signal that predicts which stocks are ready to soar 190%, 484%, and 495% in 2014, then come join me at 100% Letter.