The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (19 page)

As he formed a beautiful vase, Frank addressed the one thousand students watching him. “Pottery’s my thing,” he said, explaining that he had become successful because he loved his job. “You’ll do better if you find what you’re passionate about.”

Later that day, as Hamm fixed yet another flat tire, he began thinking about what he was excited about. He knew it wasn’t pumping gas into trucks, but he couldn’t come up with anything better.

“It bothered me for days,” he says. “I didn’t know what I had to be passionate about.”

Then it occurred to him that finding crude was his thing. He remembered the fun the oilmen seemed to have spending their money, as well as their acts of kindness and generosity. “I wanted to be like them,” he remembers. “I figured if you can find one [huge well], all this wealth was there for the taking.”

Hamm decided he’d learn as much as he could about the exploration business. He wrote a senior-year high school thesis about J. Paul Getty, Bill Skelly, and other architects of Oklahoma’s oil industry.

One day late in his senior year, as he was working at the truck stop, a man who ran a nearby hauling company drove up to him.

“What are you gonna do after high school?” the man asked.

Hamm didn’t know. He couldn’t afford college and realized he’d need to make some money. The man offered him a job and Hamm jumped at it. Soon he was working for a man named Johnny Geer who ran a company that serviced the oil industry. Hamm was given a tank truck to haul water to oil and gas drilling sites. He wasn’t searching for oil, but at least he was working with wells.

Holy cow, this is what I want to do,
he thought.

“I fell in love with working in the oil field,” Hamm says. “It was so immense, so complex, out there working for all these companies, it was totally fascinating to me.”

He had another reason to treasure the job. Hamm’s first childhood girlfriend, Judith Ann Miller, had become pregnant and the couple got married, even though both were just seventeen. The move was somewhat unusual, Hamm’s sister recalls, because Judy was Catholic. But getting married while still in high school was quite common at the time in the state, as was Hamm’s decision to join the working world at an early age.

After a couple of years, Hamm began to notice his boss, Geer, caring more about his bottle of bourbon than their work. By then, Hamm was running the operations of a business that had grown to ten trucks from just three. Geer’s drinking began to cause drivers to quit, making it hard for Hamm to run the business.

Hamm was friendly to Geer but intense about his job. Soon he was fuming about his boss. One day, he pulled Geer aside for a talk. “The next time you show up here drunk, you better bring my last check,” he told him.

A few days later, when Hamm saw Geer inebriated, he quit. Hamm spent a few months working at one of Champlin’s big refineries but grew unhappy. He couldn’t understand why union rules prevented him from helping others at the refinery, or allowed employees to sleep on the job and then complain at union meetings. He also missed the oil fields.

He heard that a local man was having trouble making payments on a “bobtail truck,” or a truck without a trailer, that he used to service those drilling for oil in the area. The man agreed to let Hamm take over payments on the truck and Hamm borrowed $1,000 and found a cosigner for the note. He was twenty and had his own business, Harold Hamm Tank Trucks, which later was renamed Hamm & Phillips. Hamm and his young wife rented a small house twenty minutes away, had a second daughter, and tried to make a success of their new life.

Competition was fierce in 1966, but Hamm outworked rivals. He took the dirtiest, nastiest jobs that no one else would touch, sometimes getting up in the middle of the night to clean tank bottoms or haul water to drilling sites. He’d pull on a pair of “high wader” boots, take a long mop, and crawl into oil tanks to rake sediment and mud out of their bottoms. He was so tired that sometimes he fell asleep with his arm in a tank, a friend remembers. When oil was pumped in and reached his arm, he’d awaken, startled.

Friendly, upbeat, and eager to learn, Hamm continued to pick the brains of industry veterans to divine secrets of the business, hoping to one day search for oil and gas. He spoke to drilling pros, well-service experts, and well-completion veterans. They taught him how to read well logs, analyze rock, and other tricks of the trade.

Hamm had a few hours during the day that still were free, so he built a library in his home and borrowed books about geology and geophysics. Around that time, his mother died of cancer. For religious reasons, she never saw a doctor, and her death was a blow to a young man juggling a young family, self-education, and his oil-service business.

“It was like a ton of bricks,” he says.

Hamm pushed himself to work even harder. He drove a beat-up car and rented his home but still didn’t have much in the bank. “I wanted to pay for my own house and have a new pickup,” he recalls.

Over a short time, though, his business grew and Hamm hired employees and bought more trucks. He gained the trust of clients by using quality equipment and not overcharging, like some rivals. Soon, he had the largest oil-field fluid and hauling transport business in the region and even found customers in Texas and elsewhere.

Hamm had a bit of wealth, something unique in his family, but it wasn’t enough for him. His dream was to find oil, just like the men he had encountered at the service station, not to clean out tankers. He wanted serious money.

“I wanted to put myself in a position to find the ancient wealth, I had this burning desire,” he says. “We all want to change the world and be bigger than our daily existence. I’m no different.”

In 1967, at the age of twenty-two, Hamm incorporated an exploration company, Shelly Dean Oil Co., named for his two daughters. He kept his service company and still did some drilling for others, but he began searching for oil and gas.

Hamm looked for an ideal spot for his first well. He had heard about an old well drilled back in 1943 by Royal Dutch Shell that had blown out and burned its rig down. Shell eventually gave up on the area. Years later, the well was redrilled and managed to produce some oil.

Hamm was encouraged by the well’s consistent production, which suggested to him that it might be part of a larger reservoir. He began looking at well logs and noticed that drillers had bored through a zone, or layer, of rock that seemed to have high permeability, or one in which fluids seemed to flow easily. He deduced that the rock in the layer was thick with oil that previous wildcatters and larger explorers had missed. Hamm slowly acquired more than one thousand acres from various companies, such as Getty Oil, and borrowed $100,000 to drill his first well, showing an unusual confidence for a young man with no exploration experience.

“I knew I could pay it off—I just didn’t have the money just then,” he says.
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In 1971, oil began to pour out of the well at a rate of about twenty barrels an hour. The well went on to produce a steady flow of oil for more than four decades. Hamm’s second well produced seventy-five barrels an hour. It turned out to be on the edge of a huge field that would generate six million barrels. Hamm’s young company was making more than $37,000 a month.

Hamm used his early proceeds to pay for classes in geology, mineralogy, and chemistry at a nearby college, though he didn’t have time to earn a degree. Now twenty-five years old, he embraced early technologies, such as computer mapping and directional drilling, the precursor to horizontal drilling.

Hamm seemed to have an unusual ability to find oil and natural gas, even when others scoffed at his efforts. “I can’t believe you think there’s oil there,” Ralph Bradley, a local farmer, told him when he proposed drilling on Bradley’s property. Bradley and his wife, an older couple who hauled water from town to their home each day in an old Chevrolet, advised him to try somewhere else.

Disregarding their advice, Hamm borrowed $90,000 to cover the expense of the well and hit a gusher producing two thousand barrels a day. The Bradleys, who received royalties from the well, took their cash and moved to Idaho to live with their grandchildren.

Hamm purchased a company that drilled wells and operated rigs for other exploration companies. As oil prices soared on the heels of the oil shocks of 1973 and 1979, demand grew for his service and drilling companies.
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Hamm sometimes used his humble beginnings to outmaneuver rivals. In 1981, Bob Moore, a competitor in the trucking business, tried to entice Hamm to buy his operation. Moore traveled to Enid and spent over an hour discussing his business with him, according to Art Swanson, who worked for Moore at the time. Moore discussed which customers he had, where he got his employees, and more. Hamm listened quietly as Moore shared more details of his operations.

When it came time to discuss the purchase of Moore’s business, Hamm suggested that he wasn’t equipped to negotiate with a veteran like Moore. “All I know is driving trucks,” Hamm told him. “I didn’t go to college.”

On the way out, Swanson realized Hamm had never had any interest in Moore’s operation. He had taken the opportunity to glean crucial intelligence from his competitor, downplaying his abilities in order to get Moore to open up.

“He had a blistering intelligence, but he was playing dumb,” Swanson says. Hamm ended up buying up other trucking companies while Moore’s went bust, according to Swanson.

Hamm sold his drilling company for more than $30 million in 1982, just before Penn Square Bank, a sizable Oklahoma bank that had profited from high-risk energy loans in the state and in Texas, collapsed, triggering huge losses for banks around the country and a painful shakeout in the energy business.

When it came to searching for oil and gas, Hamm was a successful local operator, one of many at the time. He was so parochial that in 1983 he began drilling a series of sixteen wells under Enid itself. At that point, being a neighborhood baron was enough for him, or at least for his family members. One day, his father visited the home Hamm and Judy had purchased, ten miles east of Enid. As Hamm drove up with his father, Hamm pressed a button to open the garage.

“How’d you do that?!” Leland Hamm asked his son.

“I used my garage door opener,” Hamm replied.

“But there are no wires,” Leland Hamm said, looking stunned. At that moment, he knew his son had made it.

Hamm had his first taste of wealth and he wanted much more. The Penn Square Bank failure made it harder for local drillers to get financing, but it had also reduced Hamm’s competition. He ran into bad luck of his own, though. In 1983, he endured seventeen straight dry holes trying to find productive wells in the area, a string of failures that cost his young company over $10 million. Hamm still had some cash from the sale of his drilling company, but it was running out and he began to feel the pinch. At the rate he was spending, he estimated that he’d only be able to drill for about a year more.

He sat Judy down in their family living room and warned her that their lifestyle was in jeopardy. In the nick of time, though, he hit enough oil to keep his company going.

“We were bailed out by oil,” according to Hamm.

The strike left an impression. Others were becoming enamored with natural gas, but Hamm became a believer in crude. He ordered a study to find out which regions were “oilier,” or had the potential to produce large quantities of oil, and he hired a pro to look at areas in North Dakota, Montana, and Wyoming.

Hamm wanted to check things out for himself, so he flew to Rock Springs, in the southwestern corner of Wyoming. He wore overalls and awkward “Mickey Mouse” boots that reached halfway up his calves, but he still wasn’t prepared for the bitter winter cold. His guide, who ran a local company that hauled water to drilling rigs in the area, had a similar outfit but tucked a flask of whiskey into his overalls, managing a bit better than Hamm.

Hamm ended up doing some drilling in the Midfork oil field in Montana, but the results weren’t very impressive. He survived the oil busts of the 1980s in reasonably good shape, though, even as major energy companies, such as Exxon and the Atlantic Richfield Company, focused abroad and some local competitors ran into trouble.

As rivals pulled out of the Oklahoma region, Hamm, who in 1991 renamed his company Continental Resources, was able to hire talented employees such as Jeff Hume, a young engineer and native of Enid who had worked at companies like Sun Oil, the parent of what would become Robert Hauptfuhrer’s Oryx Energy. Hamm also managed to buy acreage discarded by companies fleeing the area amid the industry’s slump. In 1985, Hamm made a deal with a larger company called Petro-Lewis Corp. to purchase more than five hundred oil and gas wells, including some in the town of Ames. “They were considered the dregs of what Petro-Lewis was selling,” says a Continental executive.

Hamm and his staff became intrigued by the area around Petro-Lewis’s wells, despite their feeble production. At the time, few rivals drilled very deep into the ground, afraid of the cost. Hamm told his men to give it a shot. They gathered publicly available information and fed it into a computer to map where accumulations of oil and gas might be hiding. The men collected and interpreted seismic data in three dimensions, a new technology at the time.

One day, Rex Olson, an exploration manager, showed a map to Hamm, pointing to an unusual structure two miles below the surface that looked like a giant hoofprint of a cow. “You know, that kind of looks like an astrobleme,” Olson told his boss, referring to an ancient meteorite crater.

“You’re kind of right, it does,” Hamm replied.

They drilled down nine thousand feet and discovered an ancient crater, eight miles in diameter, created by a meteor that had pummeled the earth hundreds of millions of years earlier. The meteor, one thousand feet across, likely hit the earth at seventy thousand miles an hour, packing so much energy that surface temperatures soared five hundred degrees in a matter of seconds, scientists later estimated. More important to Hamm was that the crater, later nicknamed Ames Hole, was brimming with oil. Continental tapped a series of prolific wells that over time yielded more than eighteen million barrels of oil and a gusher of profits.
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