Harken Gambles Big on a Small Country

By Smith, Jack Z. | THE JOURNAL RECORD, June 22, 1991 | Go to article overview

Harken Gambles Big on a Small Country


Smith, Jack Z., THE JOURNAL RECORD


N.Y. Times News Service GRAND PRAIRIE, Texas _ Harken Energy Corp. is a little Texas oil company dreaming of striking it big _ very big _ in the Middle East.

In oil industry parlance, Harken is hunting for an "elephant" _ a giant oil field potentially holding a billion or more barrels of crude.

If Harken finds black gold in the tiny Persian Gulf nation of Bahrain, those enriched by the discovery would make up a surprisingly prominent cast.

They include the billionaire Bass family of Fort Worth, Texas, Harvard University and George W. Bush, son of the president and managing general partner of the Texas Rangers baseball team.

Analysts say a giant discovery would be a "company maker" for Harken, a find that could boost its value tenfold or more virtually overnight.

As an obscure exploration company with no previous international drilling experience, Harken was extremely lucky even to get the chance to search for oil in a region surrounded by some of the world's largest petroleum deposits.

Now, the company is counting on its technical skills _ and a continued run of luck _ as it prepares to drill a series of wells in the Arab emirate of Bahrain, a group of islands just east of Saudi Arabia.

Under an agreement reached with Banoco, the national oil company of Bahrain, Harken plans to begin drilling its first well by Oct. 1 on the Jarim Reef, 25 miles north of the island of Bahrain.

The well will be a wildcat, drilled in a spot with no known oil or gas deposits. But within 50 miles are some of the world's largest petroleum fields, including the Ghawar field of Saudi Arabia, the world's largest, with recoverable reserves of 82 billion barrels of oil and 33 trillion cubic feet of natural gas.

Harken executive vice president Monte Swetnam is excited about looking for oil in a region where such copious quantities already have been found.

As he puts it, "The best place to find kindling is around the woodpile."

Dallas oilman Frank West, a member of Harken's exploration advisory board, calls the company's initial Bahrain drill site "a Class A wildcat, one that almost anyone would drill if they had the money. . . .It's a real prize."

But Mikel Faulkner, Harken's chief executive officer, is quick to emphasize that the 90-employee, Grand Prairie-based company is drilling a wildcat well _ and that is, by its very nature, a highly risky, unpredictable crap shoot.

Less than 10 percent of wildcat wells produce economically recoverable quantities of oil or gas.

"It's a wildcat prospect, so you have to give it a low probability of success, but it's the kind of thing that, if it hits, could make a tenfold increase in the value of the company," Faulkner said.

Indeed, Houston oil analyst Chuck Strain speculates that Harken's common stock could skyrocket to 10 to 15 times its current price if the company were to discover a giant field of, say, 2 billion barrels.

"I guess you'd call that a company maker," Strain said.

Harken common stock closed at $2.375 a share Friday. With nearly 44.8 million shares outstanding, the company's present market value is about $106 million. A tenfold increase in the stock price would send that market value soaring above $1 billion.

A big oil strike by Harken would enrich:

The Bass family, which has agreed to pay for Harken's drilling project in Bahrain in exchange for a cut of the revenues from oil production.

Harvard, which is, through an affiliate, a major stockholder in Harken.

Bush, a Harken stockholder, director and consultant to the company.

Harken stockholders in general, who number about 9,200.

There has been media speculation that Harken might have won the right to explore in Bahrain as a result of Bush being the offspring of President Bush. At least one newspaper article implied that the Persian Gulf War might have been fought in part to ensure that Harken peacefully could explore for oil in the Middle East. …

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